DeeSplay Ltd 

$($DeeSplay$)$ makes and sells frames for displaying vinyl LPs$.$ In September the company approached its bank for a loan to help meet short term cash requirements. In order to assess the scale of the loan required, the loan manager at the bank has asked the company to prepare a cash budget for the three months of October to December.

DeeSplay's management accountant has gathered the following information.

The budgeted data per frame is as follows:

$430$

Selling price

Variable materials cost Variable labour cost

$8$

Variable production overheads Variable selling expenses

Additional information:

Unit sales of frames are budgeted to be:

November $700$

October $900$

December $600$

September $800$

January $1,000$

Credit sales account for $80\%$ of total sales. Credit customers are expected to pay in the

month following sale for which there will be a discount of $2\%$ given. One credit customer who bought $20$ frames on $3$ September was declared bankrupt on $27$ September, with no

prospect of being able to pay their creditors. DeeSplay also wishes to make a general provision for bad debts of $1,000$ in October.

Inventory levels will be such that production takes place the month before sale. Materials are purchased one month before production takes place.

Suppliers of materials are paid two months after purchase.

DeeSplay has some obsolete materials in inventory which cost $1,200.$ These will be sold on one month's credit in October for $250.$

Labour costs are paid in the month in which they are incurred. All other expenses are paid in the month following that in which they are incurred.

Fixed expenses incurred are $1,000$ per month for the months of September and October and $1,500$ per month for the months of November, December and January. All fixed expenses are paid in the month following that in which they are incurred. The fixed

expenses include $200$ for depreciation of buildings per month. The buildings were revalued by a surveyor in September and are worth $5,000$ more than the net book value shown in September's accounts. This additional value is to be recorded in October's accounts

The company is also planning to purchase a new delivery vehicle costing $25,000,$ which will be paid in full in October. The estimated scrap value is $4,000$ in $3$ years' time. On $1$ November, additional machinery will be purchased at a cost of $15,00$ payable in three equal installments in November, December and January. The estimated scrap value is

$1,000$ in four years' time.

Depreciation is calculated straight line per month and a full month's depreciation is charged in the month of purchase.

The bank balance on $1$ October is $5,000$ in credit. Overdraft interest payments are

estimated at $125$ for November and $130$ for December. Taxable profits for last year amounted to $3,500$ and the tax on these at a rate of $17\%$ is due to be paid on $31$ October.

Prepare the cash budget for each of the three months ending $31$ December. You should make an entry in every box in the cash budget. Enter a zero or dash where applicable. Do not leave any boxes blank.