Question

Q1.ABC Company has projected sales and production in units for the second quarter of 2017 as follows

Particular	April	May	June
sales	35,000	25,000	30,000
Production	30,000	25,000	40,000

Cash production costs are budgeted at SR 7 per unit produced. Of these production costs, 30% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses (all paid in cash) amount to SR 70,000 per month. The accounts payable balance on March 31 totals $100,000, all of which will be paid in April.

Assume that all units will be sold on account for SR 20 each. Cash collections from sales are budgeted at 70% in the month of sale, 20% in the month following the month of sale and the remaining 10% in the second month following the month of sale. Accounts receivable on March 31 totaled SR 300,000 (SR50, 000 from February's sales and the remainder from March.)

Required

A. Prepare a schedule for each month showing budgeted cash disbursements for ABC Company.

B. Prepare a schedule for each month showing budgeted cash receipts for ABC Company.

Answer 1

A.	Budgeted Cash Disbursements
	1. Production cost ;
		April	May	June
	Production ( Units)	30,000	25,000	40,000
	Production cost per unit ( SR )	7	7	7
	Total production cost	210,000	175,000	280,000
	Budgeted Cash Disbursements	April	May	June
	30% of production cost paid during the same month	63,000	52,500	84,000
	70% of production cost of previous month paid during the month	100,000	147,000	122,500
	Selling and administrative expenses	70,000	70,000	70,000
	Total Budgeted Cash Disbursements	233,000	269,500	276,500
B	1. Sales revenue ;
		April	May	June
	Sales ( Units)	35,000	25,000	30,000
	Selling price per unit ( SR )	20	20	20
	Total sales revenue	700,000	500,000	600,000
	Budgeted Cash receipts	April	May	June
	70% of sales collected during the same month	490,000	350,000	420,000
	20% of sale of previous month collected during the month	166,667	140,000	100,000
	10 % of sale of month before previous month collected	50,000	83,333	70,000
	Total Budgeted Cash receipts	706,667	573,333	590,000