Reference no: EM132519587
Chicken Republic Berhad, a manufacturer of traditional breads in Port Dickson, is preparing monthly cash budgets for the month of March, April and May 2020. The following data are available from records of the company:
March April May
RM RM RM
Sales 100,000 150,000 200,000
Raw materials purchases 50,000 70,000 100,000
Wages 20,000 35,000 55,000
Manufacturing overhead costs 10,000 10,000 10,000
Selling and administration 5,000 5,000 5,000
The company has the following business policies:
- Collections of cash from customers are expected to be 80% of the sales in the month of sale and 20% in the month following the sale.
- The company pays cash for 70% of the raw materials purchases in the month of purchase and the balance is due in the month following the purchase.
- All other items besides these two are paid cash in the month they are incurred.
Other relevant data are as follows:
- Sales: February 2020: RM110,000
- Purchases of raw materials: February 2020: RM 55,000.
Other receipts:
- March, 2020: Cash Dividend received, RM25,000
- May, 2020: Cash receipts from sale of used equipment, RM30,000
Other payments:
April, 2020: payment of debt: RM 50,000 May, 2020:
Cash purchase of a new equipment for RM40,000. March, 2020:
Cash purchase of fixed assets for RM70,000
May, 2020: payment of taxes RM25,000
- The company proposed to pay cash dividend of RM 20,000 in May, 2020.
- Closing Cash balance as at February 28, 2020 is estimated at RM55,000.
Required:
Question a) Prepare Cash Budget for Kilang Roti Berhad for the month of March, April and May 2020. (show all working)
Question b) Analyze the Cash Budget for the month of May, 2020