Question

Question 3 (October 2018)

Dyson Company Malaysia manufactures the cyclonic vacuum cleaner which us to be sold in Asia for RM2,000 per vacuum. The following information is in relation to the budgeted production and sales of cyclonic vacuum cleaners for the last quarter of 2017.

1. Budgeted sales in units:

July 10,000
August 12,000
September 14,000
October 13,500
November 13,800
December 14,500

60% of the sales will be collected one month after sales.
30% of the sales will be collected two months after sales.
10% of the sales will be collected three months after sales.

2. Variable production cost per vacuum:
RM
Direct materials 30.00
Direct labour 21.00
Overhead 16.00

3. Budgeted production in units:

August 12,000
September 14,000
October 13,500
November 13,800
December 14,500

4. It is the company policy to pay creditors for material two months after purchases are made.

5. Wages and variable overhead are paid within the month they are incurred.

6. Sales commission are 8% on sales and are to be paid one month after sales are made.

7. Fixed overhead is RM210,000 per month, which includes depreciation of RM65,000.

8. Fixed selling and administration is RM72,000 per month which is payable in the month it is incurred.

9. One of the old machines will be sold for RM12,000 in the month of November and a new machine will be replace it in the same month at a cost of RM78,000.

10. The company will pay dividends which was declared at RM100,000 at the end of December.

11. It is expected that the cash balance on 30th September will be RM80,000.



Required:
a) Prepare a schedule of expected cash collections from customer for the last quarter of 2017.                                                                                                         

b) Prepare schedule for payment of materials for the last quarter of 2017.            

c) Prepare a cash budget for the last quarter of 2017.                                        
(Total: 30 Marks)

Answer 1

a) Schedule of expected cash collections from customer for the last quarter of 2017 (Only data of last quarter of 2017 have been taken into consideration ).                                         

Sales Units	Total sales (in RM)	July	August	Septrember	October	November	December
July 10,000	20000000		12000000	6000000	RM2000000
August 12,000	24000000			14400000	RM7200000	RM2400000
September 14,000	28000000				16800000	RM8400000	RM2800000
October 13,500	27000000					RM16200000	RM8100000
November 13,800	27600000						RM16560000
December 14,500	29000000
Total	RM26000000	RM27000000	RM27460000

b) Schedule for payment of materials for the last quarter of 2017. (Only data of last quarter of 2017 have been taken into consideration )

Purchased Units	Total Amount of purchase	July	August	Septrember	October	November	December
July 10,000	300000
August 12,000	360000				RM 360000
September 14,000	420000					RM420000
October 13,500	405000						RM405000
November 13,800	414000
December 14,500	435000
		Total	RM360000	RM420000	RM405000

c) Prepare a cash budget for the last quarter of 2017.

Particulars	October	November	December
	(Amt. in RM)	(Amt. in RM)	(Amt. in RM)
Estimated cash receipts from:
Credit Sales	2,60,00,000	2,70,00,000	2,74,60,000
Sale of old machine	0	12,000	0
Total cash receipts   (A)	2,60,00,000	2,70,12,000	2,74,60,000
Estimated cash payments for:
Direct materials 30.00	3,60,000	4,20,000	4,05,000
Direct labour 21.00	2,83,500	2,89,800	3,04,500
Overhead 16.00	2,16,000	2,20,800	2,32,000
Sales Commission	22,40,000	21,60,000	22,08,000
Fixed man. Overheads	1,45,000	1,45,000	1,45,000
Fixed selling and administration overheads	72,000	72,000	72,000
Purchase of new machine	0	78,000	0
Total cash payments (B)	33,16,500	33,85,600	33,66,500
Overall cash increase (A-B)	2,26,83,500	2,36,26,400	2,40,93,500
Cash balance at beginning of month	80,000	2,27,63,500	4,63,89,900
Cash balance at end of month*	2,27,63,500	4,63,89,900	7,04,83,400
*Closing cash balance is always beginning Cash balance of next month.

Note-

1.The company will pay dividends which was declared at RM100,000 at the end of December, so acatual payment was not done till december hence not recorded in cash budget.

2. Fixed overhead is RM210,000-RM65000=RM145000 per month.

Thanks & all the best