Now you have some idea as to the underlying prncples, let us put these to work....

Transcribed Image Text:

Now you have some idea as to the underlying prıncıples, let us put these to work. From the following information which relates to George and Zola, prepare a month by month cash budget for the second half of 20X5 and make brief comments as you consider might be helpful to management. (a) The company's only product, a leather bag, sells at K40 and has a variable cost of K26 made up as follows. Material K20 Labour K4 Variable overhead K2 (b) Fixed costs of K6.000 per month are paid on the 28th of each month. (c) Quantities sold/to be sold on credit May June July Aug Sept Oct Nov Dec 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,600 (d) Production quantities May June July Aug Sept Oct Nov Dec 1,200 1,400 1,600 2,000 2,400 2,600 2,400 2,200 (e) Cash sales at a discount of 5% are expected to average 100 units a month. (f) Customers are expected to settle their accounts by the end of the second month following sale. s are (g) Suppliers of material are paid two months after the material is used in production. (h) Wages are paid in the same month as they are incurred. ) 70% of the variable overhead is paid in the month of production, the remainder in the following month. G) Company tax of K18,000 is to be paid in October. (k) A new delivery vehicle was bought in June, the cost of which, K8,000 is to be paid in August. The old vehicle was sold for K600, the buyer undertaking to pay in July. (1) The company is expected to be K3,000 overdrawn at the bank at 30 June 20X5. (m) The opening and closing inventories of raw materials, work in progress and finished goods are budgeted to be the same. Now you have some idea as to the underlying prıncıples, let us put these to work. From the following information which relates to George and Zola, prepare a month by month cash budget for the second half of 20X5 and make brief comments as you consider might be helpful to management. (a) The company's only product, a leather bag, sells at K40 and has a variable cost of K26 made up as follows. Material K20 Labour K4 Variable overhead K2 (b) Fixed costs of K6.000 per month are paid on the 28th of each month. (c) Quantities sold/to be sold on credit May June July Aug Sept Oct Nov Dec 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,600 (d) Production quantities May June July Aug Sept Oct Nov Dec 1,200 1,400 1,600 2,000 2,400 2,600 2,400 2,200 (e) Cash sales at a discount of 5% are expected to average 100 units a month. (f) Customers are expected to settle their accounts by the end of the second month following sale. s are (g) Suppliers of material are paid two months after the material is used in production. (h) Wages are paid in the same month as they are incurred. ) 70% of the variable overhead is paid in the month of production, the remainder in the following month. G) Company tax of K18,000 is to be paid in October. (k) A new delivery vehicle was bought in June, the cost of which, K8,000 is to be paid in August. The old vehicle was sold for K600, the buyer undertaking to pay in July. (1) The company is expected to be K3,000 overdrawn at the bank at 30 June 20X5. (m) The opening and closing inventories of raw materials, work in progress and finished goods are budgeted to be the same.