Reference no: EM132617459

Question - Woof Ltd sells pet food in 10-kilogram bags for $12.40 per bag. Sales estimates for the two months of the year are as follows:

Bags

January 20,000

February 17,000

All sales are credit sales.

Woof Ltd purchases bags of pet food at $9.40 per bag and pays for them the month after the purchase. Purchases estimates for the two months of the year are as follows:

Bags

January 19,250

February 16,500

Last December purchases were 21,000 bags.

General and administrative expenses total $18,000 per month (including $10,000 depreciation) and Woof Ltd pays for these expenses (except for depreciation) in the same month they are incurred. January's current liabilities (all to be paid in January) total $35,500. The business' cash balance on 1 January is $38,000.

TASK -

(a) Calculate the total cash receipt for January and February. Provide workings.

(b) Calculate the total cash payments for January and February. Provide workings.

(c) Calculate the cash balance at the end of January and February. Provide workings.

(d) Explain two benefits a company could have when it prepares a cash budget.