Reference no: EM132025834

Assignment - Cash budget

TechCo Ltd is a retail distributor for MZB-33 computer hardware units. Sales forecasts for the first six months of 2014 are as follows:

	Units	Dollars
January	130	390,000
February	120	360,000
March	110	330,000
April	90	270,000
May	100	300,000
June	125	375,000
Total	675	2,025,000

Total sales consist of 25% cash sales, 30% credit cards sales and 45% sales on account. The cash sales and cash from credit cards sales are received in the month of sale. Credit card sales are subject to a 4% discount. The cash receipts for sales on account are 70% in the month following the sale and 28% in the second month after the sale. The remaining 2% are estimated to be uncollectable.

TechCo's month end inventory requirement for computer hardware units is 30% of the next month's sales. The purchase price is $1800 per unit. Approximately 60% of the purchases in a month are paid in that month and the rest paid in the following month.

Selling and administration expenses are equal to 10% of the current month's sales, including $2000 of depreciation. These expenses are paid as incurred.

Required:

1. What are the four elements of the budgeting cycle?

2. Prepare a schedule of cash collections for April 2014.

3. Prepare the budgets for purchases in units and in dollars for the months of March and April.

4. Prepare a schedule of cash payments for April 2014.

5. Prepare a cash budget for April 2014, assuming the cash balance as of 1 April is $10,000.