Reference no: EM13343588

Question-

Broadbeach Ltd requires a cash budget for the month of October. The company's financial officer has provided the following information and assumptions:

i. The 1 October cash balance is expected to be $ 55,750.

ii. All sales are on account. Credit sales are collected over a three month period with 65% collectedin the month of sale, 30% in the month following sale, and 5% in the second month following sale.

iii. Actual sales for August and September were $ 85,500 and $ 78,100 respectively. October's sales are budgeted at $ 99,500.

iv. Marketable securities are expected to be sold for $ 54,000 during the month of October.

v. The financial officer estimates that direct materials totalling $ 75,300 will be purchased during October. 50% of a month's raw materials purchases are paid for in the month of purchase with the remaining 50% paid for in the following month. Accounts payable for September purchases total $22,900 which will be paid in October.

vi. October direct labour costs are expected to be $ 40,000.

vii. Manufacturing overhead is estimated to be 50% of direct labour costs, noting that approximately 10% of the manufacturing overhead is depreciation on factory buildings and equipment.

viii. Selling and administration expenses are budgeted at $ 48,000 for October. $22,000 of this amount is for depreciation.

ix. During October, Broadbeach Ltd plans to purchase a new delivery van costing $45,000. The company will pay cash for the van.

x. Broadbeach Ltd owes $ 12,000 in income tax and this will be paid in October.

xi. Broadbeach Ltd must maintain a minimum cash balance of $ 10,000 . To bolster the cash balance as needed, an open line of credit is available from the bank at 8% per annum interest.

Required: Prepare the following for Broadbeach Ltd:

a) A schedule of cash collections.

b) A schedule of cash payments for raw materials.

c) A cash budget for the month of October. Indicate any borrowing that will be necessary during the month.