BlackPink Berhad, a SME in F&B, budgets their business in 2021 as follows:
OPERATING BUDGET
1. Expected sales volume: 3,000 units for Q1 with 500-units increase in each succeeding Qs

SP @ $60/unit

2. Able to meet sales needs with FG ending inventory of 20% of next quarter sales.
3. Would like to maintain RM inventory at 10% of next quarter production requirements.
4. Each unit would require: 5 oz. of material @ $3/oz.
5. Desired ending for DM in the last Q4 is 5,400 oz.
6. Two (2) hours of DL required to produce each unit @ $10/hour rate.
7. Expects the following variable MOH costs to fluctuate on production volume based on DLH:
Indirect materials $1 Utilities $0.40
Indirect labour $1.40 Maintenance $0.20
8. Fixed MOH:
Supervisory salaries $20,000

Property Taxes &
Insurance $9,000
Depreciation $3,800 Maintenance $5,700
9. Variable S&A expense on sales revenue are as follow:
Commissions 1.00% Freight-out 0.50%
10. Fixed S&A:
Advertising $5,000 Depreciation $1,000
Sales salaries $15,000

Property Taxes &
Insurance $1,500

Office salaries $7,500
10. Interest expense is based on its loan repayment at 2%.
11. Income tax are exempted due to the pandemic.
FINANCIAL BUDGET
1. Expected cash balance on Q1 is $150,000. Wish to maintain balance at least $20,000.
2. Sales collection:

60% collected in the Q sold
40% collected in the following month

3. A/C Receivable from Q4 in 2020 of $48,000 is expected to be collected in Q1 of 2021.
4. ST investment are expected to be sold for $2,000 cash in Q1 and $5,000 cash in Q4.
5. DM purchases:

50% paid in the Q purchased
50% paid in the following month

6. A/C Payable of $20,125 from the previous Q4 of 2020 is expected to be paid in Q1 of 2021.
7. DL payment: 100% expected to be paid in Q incurred
8. MOH and S&A: all items except depreciation paid in Q incurred
9. Plan to purchase a second-hand truck in Q2 for $5,000 cash.
10. Estimated annual income taxes expected to be paid in equal quarterly payments.
11. Loans are repaid in earliest Q with sufficient cash.

Required:
Prepare the following budgets for BlackPink Berhad:

(ix) Cash Budget

Answer rating: 100% (QA)

Cash Budget Q1 2021 Beginning Cash Balance 150000 Inflows Collections from Customers Q1 Sales 3000 units x 60unit 180000 60 of Q1 Sales 108000 40 of Q4 2020 Sales 48000 Total Collections 156000 ST Inv... View the full answer