SM Ltd. furnishes the following forecast for the quarter ending 31 March, 2012. Sales: January February...

 

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SM Ltd. furnishes the following forecast for the quarter ending 31" March, 2012. Sales: January February Rs. 12,00,000 Rs. 11,00,000 Rs. 14,00,000 March During the month of December 2011 the company made a sale of Rs. 10,00,000 and computed the cost of sales as under: Raw Material Wages (variable) Overhead (variable) Overhead (fixed) Rs. 3,50,000 Rs. 1.75,000 Rs. 1,75,000 Rs. 1,50,000 The fixed overhead include depreciation of Rs. 40,000. One-fifth of sales is for cash on which a cash discount of 1.5% is allowed. Of the remaining portion 50% is collected in the same month and the balance in the next month. Raw material suppliers allow a credit of one month. Wages are paid on the last working day of the month to which they relate. While variable overhead are paid in the next month, fixed overhead expenses are met in the same month. The percentage of contribution to sales as obtained in December 2011 is expected to be maintained during the forthcoming quarter also. The cash balance on 1st January, 2012 is Rs. 50,000. The company has to pay Rs. 3,50,000 as interest on term loan in January 2012 and a sum of Rs. 60,000 as instalment of arrears of wages in March 2012 and the bank will debit quarterly interest of Rs. 4,00,000 on drawing in March 2012. Prepare a cash budget showing the cash position for each of the three months of the quarter ending March 2012. (10) SM Ltd. furnishes the following forecast for the quarter ending 31" March, 2012. Sales: January February Rs. 12,00,000 Rs. 11,00,000 Rs. 14,00,000 March During the month of December 2011 the company made a sale of Rs. 10,00,000 and computed the cost of sales as under: Raw Material Wages (variable) Overhead (variable) Overhead (fixed) Rs. 3,50,000 Rs. 1.75,000 Rs. 1,75,000 Rs. 1,50,000 The fixed overhead include depreciation of Rs. 40,000. One-fifth of sales is for cash on which a cash discount of 1.5% is allowed. Of the remaining portion 50% is collected in the same month and the balance in the next month. Raw material suppliers allow a credit of one month. Wages are paid on the last working day of the month to which they relate. While variable overhead are paid in the next month, fixed overhead expenses are met in the same month. The percentage of contribution to sales as obtained in December 2011 is expected to be maintained during the forthcoming quarter also. The cash balance on 1st January, 2012 is Rs. 50,000. The company has to pay Rs. 3,50,000 as interest on term loan in January 2012 and a sum of Rs. 60,000 as instalment of arrears of wages in March 2012 and the bank will debit quarterly interest of Rs. 4,00,000 on drawing in March 2012. Prepare a cash budget showing the cash position for each of the three months of the quarter ending March 2012. (10)

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The contribution to sales ratio for December 2011 is obtained as follows Rs Sales 1000000 Less Varia... View the full answer