Question

The following budgeted income statement has been prepared for XY company for the months of January to April 2020

Jan Feb Mar April

Le000 Le000 Le000 Le000

Sales 60.0 50.0 70.0 60.0

Costs of production 50.0 55.0 32.5 50.0

(increase)/decrease in inventory (5.0) (17.5) 20.0 (5.0)

Cost of sales 45.0 37.5 52.5 45.0

Gross Profit 15.0 12.5 17.5 15.0

Administration and selling overhead (8.0) (7.5) (8.5) (8.0)

7.0 5.0 9.0 7.0

Additional information:

40% of the production cost relates to direct materials. Materials are bought in the month prior to the month in which they are used. Purchases are paid for one month after purchase.
30% of the production cost relates to direct labour which is paid for when it is used.
The remainder of the production cost is produced overhead.
Le 5,000 per month is a fixed cost which includes Le 30,000 depreciations. Fixed production overhead costs are paid for when incurred.
The remaining overhead is variable. The variable production overhead is paid 40% in the month of usage and the balance, one month later. Unpaid variable production overhead at the beginning of January is Le 90,000.
The administration and selling costs are paid quarterly in advance on 1st January, 1st April,1st July, and 1st October. The amount payable is Le 15,000 per quarter.
All sales are on credit. 20% of receivables are expected to be paid in the month of sale and 80% in the month following. Unpaid trade receivables at the beginning of January were Le 44,000.
The Company intends to purchase equipment costing Le 30,000 in February which will be payable in March.
The bank balance on 1st January 2020 is expected to be Le 5,000 overdrawn.
You are required to prepare the cash budget for the first quarter of 2020.   

Answer 1

	DECE	JANUARY	FEB	MARCH	APRIL
PARTICULARS
SALES		60000	50000	70000	60000
COLLECTION 20% IN THE MONTH		12000	10000	14000	12000
80% IN THE FOLLOWING MONTH			48000	40000	56000
OOPENING BALANCE		44000
TOTAL RECEIPT		56000	58000	54000	68000
COST OF PRODUCTION		50000	55000	32500	50000
MATERIALS 40% OF COST OF PRODUCTION		20000	22000	13000	20000
PURCHASR OF RM ARE MADE PRIOR TO	20000	22000	13000	20000
THE MONTHE THEY ARE USED
PAYMENT OF RM-1 MONTH AFTER PURCHASE		20000	22000	13000	20000
LABOUR -30% OF COST OF PRODUCTION		15000	16500	9750	15000
PAYMENT IN THE SAME MONTH
PRODUCTION OH-30%		15000	16500	9750	15000
FIXED		5000	5000	5000	5000
LESS DEPRECIATION-30000 /12 NON CASH ITEM		2500	2500	2500	2500
CASH FIXED OH-PAID SAME MONTH		2500	2500	2500	2500
VARIABLE OVER HEADS		10000	11500	4750	10000
40% IN THE MONTH		4000	4600	1900	4000
60% IN THE FOLLOWING MONTH			6000	6900	2850
OPENING BALANEC		90000
TOATL VARIABLE OH		94000	10600	8800	6850
ADMINISTARION AND SELLING OH ADVANCE PAYMENT		15000
PER QUARTER
CASH BUDGET
		JANUARY	FEB	MARCH
OPENING BALANCE		-5000	-95500	-89100
TOTAL SALES RECEIPTS		56000	58000	54000
TOTAL   RECEIPTS		51000	-37500	-35100
COST OF PRODUCTION
MATERIALS		20000	22000	13000
LABOUR		15000	16500	9750
FIXED OVER HEADS		2500	2500	2500
VARIABLE OVER HEADS		94000	10600	8800
ADMNISTRATION & SELLING OH		15000
PURCHASE OF EQUIPMENT				30000
		146500	51600	64050
CLOSING BALANCE		-95500	-89100	-99150