Reference no: EM132587796

ABC ltd is preparing its budget for the 4 months commencing 1.1.20. The company makes and sells a single product. The details of the products are as follows.

Selling price - Kshs. 400 per unit

Direct material - Kshs. 50 per uni

Direct Labour - Kshs. 100 per unit

Variable labour - Kshs. 60 Per unit

The following information is also available

                          Nov           Dec         Jan            Feb            March             April
Sales (units)        1300           1500        1700       1500          1800         1800
Desired closing stock 100                         100          500          400         400

Additional information

1. Fixed overheads are budgeted at Kshs. 70,000 per month including depreciation of Kshs. 10,000

2. Wages are paid 75% during the month in which they are earned and 25% the following month

3. Variable overheads are paid in the month in which they are incurred

4. Materials costs are paid two months after the material is used in production

5. There is a tax liability of Kshs. 140,000 to be settled in February

6. The company will purchase a new machine for Kshs. 200,000 in January. The present machine will be sold for Kshs. 30,000 receivables in March

7. 5% of the monthly sales are for cash. The remainder will be sold on credit with the debtors settling one month after the sales 8. The cash balance on 01.01.2020 is Kshs. 10,000

Required

Question1 : construct a cash budget for the period January - April 2020