The accountant of Turn Key (Pty) Ltd instructs you to prepare a monthly cash budget for August. You are presented with the following budget information for July and August 2020. July August Sales. R590 000. R650 000 Manufacturing costs. R300 000. R340 000 Selling and administrative expenses R150 000. R170 000 Capital expenditures R120 000 (August) 1. The company expects to sell 10% of its merchandise for cash. 2. Credit sales will be collected as follows: 60% are expected to be collected in the month following the month of sale, and the remainder, in the second month following the month of sale. 3. On August 1 Cash balance was R55 000. 4. Accounts receivable as a result June credit sales was R442 000. 5. It is expected that R1 500 in dividends will be received in August. 6. All selling and administrative expenses are paid in cash in the period in which they are incurred. 7. Estimated monthly manufacturing costs include depreciation of R30 000. 8. An estimated income tax payment of R42 000 will be made in September. 9. Turn Key’s (Pty) Ltd will pay a dividend of R15 000 in October. Required: Prepare a cash budget for the month August 2020 to be able to answer the multiple-choice questions that follow
The accountant of Turn Key (Pty) Ltd instructs you to prepare a monthly cash budget for August. You are presented with the following budget information for July and August 2020. July August Sales. R590 000. R650 000 Manufacturing costs. R300 000. R340 000 Selling and administrative expenses R150 000. R170 000 Capital expenditures R120 000 (August) 1. The company expects to sell 10% of its merchandise for cash. 2. Credit sales will be collected as follows: 60% are expected to be collected in the month following the month of sale, and the remainder, in the second month following the month of sale. 3. On August 1 Cash balance was R55 000. 4. Accounts receivable as a result June credit sales was R442 000. 5. It is expected that R1 500 in dividends will be received in August. 6. All selling and administrative expenses are paid in cash in the period in which they are incurred. 7. Estimated monthly manufacturing costs include depreciation of R30 000. 8. An estimated income tax payment of R42 000 will be made in September. 9. Turn Key’s (Pty) Ltd will pay a dividend of R15 000 in October. Required: Prepare a cash budget for the month August 2020 to be able to answer the multiple-choice questions that follow
Chapter6: Managing Cash Flow
Section: Chapter Questions
Problem 1EP
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
The accountant of Turn Key (Pty) Ltd instructs you to prepare a monthly cash budget for August. You are presented with the following budget information for July and August 2020.
July August
Sales. R590 000. R650 000
Manufacturing costs . R300 000. R340 000
Selling and administrative expenses R150 000. R170 000
Capital expenditures R120 000 (August)
1. The company expects to sell 10% of its merchandise for cash.
2. Credit sales will be collected as follows:
60% are expected to be collected in the month following the month of sale, and the remainder, in the second month following the month of sale.
3. On August 1 Cash balance was R55 000.
4. Accounts receivable as a result June credit sales was R442 000.
5. It is expected that R1 500 in dividends will be received in August.
6. All selling and administrative expenses are paid in cash in the period in which they are incurred.
7. Estimated monthly manufacturing costs include depreciation of R30 000.
8. An estimated income tax payment of R42 000 will be made in September.
9. Turn Key’s (Pty) Ltd will pay a dividend of R15 000 in October.
Required:
Prepare a cash budget for the month August 2020 to be able to answer the multiple-choice questions that follow.
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