Question $3$

$(20$ marks$)$

Simplex Company will begin operations in September $2024.$ They have raised N$$150000$ cash at bank, from an issue of shares. Goods required for resale will be costing N$$45000$ will be purchased in August $($prior to commencement$),$ with further purchases in the following three months sufficient to increase imventory by NSS $000$ each month. Goods are purchased on one month's credit.

Sales are to be made on credit at a mark$-$up of $40\%$ on cost$.$ Sales in the first three months of operations, at a selling price of N$$14$ per unit, are expected to be:

September $1500$ units

October $4500$ units

November $5000$ units

$50\%$ of customers are expected to pay in the month following sale and the remaining $50\%$ one month later. Variable overheads are forecast at $5\%$ of sales, payable in the month in which they are incurred.

Fixed overheads, excluding depreciation, are expected to be N$$11800$ per month starting in September. Fixed overheads are payable one month after they are incurred. Depreciation of fixed

assets will be N $$2000$ per month on the capital expenditure of $N$$$120000$ that will take place in August. Payment will be made in September.

Interest is payable monthly, at a rate of $12\%$ per annum, on any opening overdraft balances $($you may assume that the company gets an automatic overdraft from the bank$).$

$\backslash$table$[[$Required$,$Marks$],[3\mathrm{.}1,\backslash$table$[[$Prepare a cash budget for each of the three months, September to November,$],[$showing clearly any overdraft required and the associated interest costs.$]],13],[2\mathrm{.}2,$Calculate the number of units in inventory at the end of November.,$3],[2\mathrm{.}3,$Calculate the profit after interest in November if a marginal costing system is used.,$4],[$Total$,20,]]$

Total assignment: $84$ marks

Page $12$ of $129$