You have now been asked to work with a textile startup business that your firm has just taken on as a client. The business is particularly in need of support and guidance with budgeting and how it can be used to inform efficient resource allocation and support effective control and decision making. The founder of the business is investing 100,000 Dhs. of their own capital and has also secured a business loan of 50,000 Dhs. Following is the RAW data to help produce the budget:

CASH BUDGET F OF 'ON CUE CLOTHING CO. LTD.'
Month	Sales volume (qty)	Purchases	Wages	Marketing expenses	Rent
January	8000	45000	20000	10000	20000
February	8000	42000	18000	12000	20000
March	7500	40000	22000	16000	20000
April	9200	38000	24000	8000	20000
May	8500	50000	20000	10000	20000
June	9000	45000	26000	6000	20000
July	8600	46000	20000	6500	20000
August	8000	40000	28000	12000	20000
September	6800	52000	18000	18000	20000
October	7900	39000	22000	8000	20000
November	8200	36000	26000	8500	20000
December	9400	40000	16000	12000	20000
§The price per unit is 14 Dhs.
(sales revenue = sales volumeû price per unit)
§ OPENING BALANCE OF JANUARY MONTH IS 22000/-
ADDITIONAL INFORMATION:
Production of a 12-month cash budget that makes use of variance analysis to show the impact of the different individual scenarios below: 1. discounting prices by 20 percent, which in turn increases sales volume per month by 10 percent 2. increasing the marketing budget by 10 percent per month. 3. offering suppliers one month’s trade credit 4. reducing rental/property-related costs by 15 percent per month.

You have been asked to prepare a memorandum that includes the following.

• Production of a 12-month cash budget that makes use of variance analysis to show the impact of the different individual scenarios below:
  1. discounting prices by 20 percent, which in turn increases sales volume per month by 10 percent
  2. increasing the marketing budget by 10 percent per month, which in turn generates an additional 20 percent in sales revenue
  3. offering suppliers one month’s trade credit
  4. reducing rental/property-related costs by 15 percent per month.

Answer rating: 100% (QA)

Solutions 1 Scenario 1 Discounting prices by 20 percent which in turn increases sales volume per month by 10 percent Assuming that all other variables ... View the full answer