Prepare a cash Budget. $(16$ Marks$)$

INFORMATION

The following information was supplied by Hingham Enterprises to assist with the preparation of the cash

budget for January and February $2026$:

$1.$ Hingham Enterprises expects to have a favourable bank balance of R$100000$ on $31$ December $2025.$

$2.$ The monthly sales forecasts are as follows:

$2025$ Units

November $42000$

December $55000$

$2026$ Units

January $45000$

February $32000$

$3.$ The selling price is R$25$ per unit. All the goods produced each month are expected to be sold in the

same month. Forty percent $(40\%)$ of the sales is on credit and the balance is for cash. Thirty percent

$(30\%)$ of the cash sales are to informal vendors and are subject to a discount of $10\%.$

$4.$ Credit sales are usually collected as follows:

$30\%$ in the month of sale, and these debtors receive a $5\%$ discount.

$65\%$ in the month after the sale, and the rest is usually written off as bad debts.

$5.$ Manufacturing overheads are paid monthly. The estimated overheads for December $2025$ are

R$70000.$ Overheads are expected to increase by $10\%$ each month thereafter.

$6.$ Labour costs amount to R$7$ per unit and are paid in the month in which they are incurred. Labour costs

per unit are expected to increase by $8\%$ with effect from $01$ February $2026.$

$7.$ Materials cost R$8$ per unit $($excluding discounts$).$ Fifty percent $(50\%)$ of the materials is purchased for

cash in order to take advantage of a $10\%$ cash discount. The balance is purchased on credit and the

credit terms of $60$ days will be adhered to$.$

$8.$ R$300000$ is expected to be placed in an investment account on $01$ February $2026.$ Interest at $8\%$ per

annum is receivable monthly, commencing February $2026.$

$9.$ Selling and administrative costs are paid monthly and are expected to total R$76300$ for February $2026,$

$9\%$ higher than the costs for January $2026.$