Prepare a cash budget, Cost Accounting

Assignment Help:

You have been asked to prepare a cash budget for Whitborrow plc for the next three months, October, November and December. The Managers are concerned that they may not have sufficient cash to pay for a £150,000 investment in equipment in December. The overdraft has reached its limit £70,000 at the present time - the end of September. Sales during September were a total of £400,000 of which £55,000 was received in cash. £165,000 is expected to be paid on October, with the remainder likely to flow in during November. Sales for the next three months are as follows:

                                         Total sales                            Cash sales             Credit sales

            October                      450,000                              90,000                     360,000

            November                  550,000                              110,000                     440,000

            December                  700,000                              140,000                     560,000

There is a gross profit margin of 40 percent on sales. All cost (materials, labour and other) are paid for on receipt. Only 20 percent of customer sales are expected to be paid for in the month f delivery. A further 70 percent will be paid after one month and the remainder after two months. Labour and other costs amount to 10 percent of sales. Debtor levels at the end of September are £400,000 and the investment in stock is £350,000

Required:

a. Prepare a cash budget for October, November and December, and state if the firm will be able to purchase the new equipment.

b. Recommend action that could be taken to improve the working capital position of Whitborrow.


Related Discussions:- Prepare a cash budget

Critical thinking about cost flow, Critical Thinking about Cost Flow It...

Critical Thinking about Cost Flow It is simple to overlook an important aspect of cost flow within a manufacturing operation. If you see that have taken note of an important co

Compute the sales activity variance for each product, The next year's budge...

The next year's budget for Benny, Inc., is given below: Product 1-2 Sales $945,000-688500 Variable costs 459,900-297,000 Fixed costs 300,000-3

#title.Case Study., A retail dealer in garments is currently selling 24000 ...

A retail dealer in garments is currently selling 24000 shirts annually. He supplies the following details for the year ended 31st December,2007. Rs Selling Price per shirt

Traditional income statement, Traditional income statement: The DU Inn i...

Traditional income statement: The DU Inn is an 80-room hotel located on some mountaintop in Colorado. It has no bar or restaurant and is positioned as a mid-priced, good quality

Sales budget, Sales Budget It provides volume of sales and sales mix o...

Sales Budget It provides volume of sales and sales mix of the recent operations. The sales forecast is initially prepared and upon completion the sales budget is finalized. Th

Case study, A family in Cambridge received their Christmas presents from fr...

A family in Cambridge received their Christmas presents from friends in Paris this week – 50 days after their parcel was posted. French posties sent it to Cambodia, and the near-20

Difference between cost accounting and financial accounting, The difference...

The difference among "cost accounting" and "financial accounting are terms demote to the accounting techniques used internally by a company's management to explain the costs of run

Fixed budgeting, Fixed Budgeting The master budget discussed before is...

Fixed Budgeting The master budget discussed before is a fixed budget. A fixed budget is defined via as: 1. Just one level of activity 2. Not adjusted to re

Prepare the material cost budget of products of a company, Prepare the Mate...

Prepare the Material Cost Budget of products of a Company For a company along with many products, a periodic budget would be developed given as: Assume a firm has 3 products X

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd