Mabel, the owner of Mabel’s Bridal Boutique, is concerned about the current and future cash flow position of her business. While attending a business seminar she learnt about cash budgets and their value. She contracted you to help her prepare a cash budget for the months of October – December 2023.

She provided the following information for this purpose:

Month	September	October	November	December
Estimated sales	4 100 000	4 800 000	5 400 000	6 600 000
Estimated purchases	2 800 000	6 200 000	6 300 000	5 700 000

Seventy percent (70%) of monthly sales is cash sales and the rest of monthly sales are credit sales. Credit sale customers must settle their accounts by repaying 60% of their purchases in the month following the sale and the remaining balances two months after the sale.

Mabel pays cash for forty percent (40%) of her monthly purchases, the balances being credit purchases that she must pay for, one month after making the purchase.

Mabel expects to incur the following expenses as well:

• She plans to replace all furnishings and display cabinets in November at an estimated cost of R800 000.

• The monthly property rental is R15 000 per month, but the rent is set to increase by 20% in December.

• Monthly municipal services are fixed at R5 000 per month and her tax consultant informed her that she will have to pay R30 000 in provisional tax in November.

• Salaries and wages are R50 000 per month, increasing by 10% as from December 2023.

At the end of September 2023, the cash balance in the bank account was R50 000 and she requires a minimum cash balance of R100 000 per month.

Required:

Prepare a cash budget for Mabel’s Boutique for the period October – December 2023, using the detailed format for a cash budget.

Answer rating: 100% (QA)

To prepare a cash budget for Mabels Bridal Boutique for the period October to December 2023 we need to consider the estimated sales purchases expenses ... View the full answer