Question
In: Accounting
Mr. Raju just appointed as an account manager at NH Sdn Bhd, a retail company selling...
Mr. Raju just appointed as an account manager at NH Sdn Bhd, a retail company selling merchandises for local market. Mr. Raju is being responsible to prepare and monitor the budget and expenses of the company business. Currently the company is preparing the quarterly budget as of 31 December 2020 and he has been asked by Ms. Sally, the owner of the company, to prepare a master budget. The sales forecast for the merchandises are provided as follows:
|
Unit sales |
|
|
August 2020 |
1,500 actual |
|
September 2020 |
1,600 actual |
|
October 2020 |
1,700 budgeted |
|
November 2020 |
2,300 budgeted |
|
December 2020 |
2,400 budgeted |
|
January 2021 |
1,300 budgeted |
The average selling price and the average purchase price per unit are RM250 and RM120 respectively. As for desired ending inventory is expected 30% of next month’s unit sales. Collections from customers will be 20% in month of sale, 50% in month after sale and 30% two months after sale.
As for projected cash payments, inventory purchases will be paid in the month following acquisition. Meanwhile, variable cash expenses are equal to 35% of each month’s sales and paid in the month of sale. Fixed cash expenses are RM20,000 per month and are paid in the month incurred. Depreciation on equipment is RM2,000 per month. Desired ending cash balance per month will be RM20,000.
NH Sdn Bhd also has provided the following information at 30 September 2020
Balance Sheet as at 30 September 2020
|
RM |
|
|
Cash |
30,000 |
|
Account Receivable |
245,000 |
|
Merchandise inventory(650 unit) |
78,000 |
|
Fixed Assets (net) |
110,000 |
|
Total assets |
463,800 |
|
Account Payable(Merchandise) |
148,800 |
|
Owner’s Equity |
315,000 |
|
Total liability and equity |
463,800 |
Required:
Based on the information given, you are required to prepare the following budget** for the upcoming quarter ending 31 December 2020.
- Sales Budget for each month of the quarter;
- Purchases Budget for each month of the quarter;
- Cash Budget for each month of the quarter;
- Budgeted Income Statement; Quarter
- Budgeted Balance Sheet.
Solutions
Expert Solution
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| NH Sdn Bhd | |||||
| Sales Budget | October | November | December | Total | Note |
| Units sold | 1,700.00 | 2,300.00 | 2,400.00 | 6,400.00 | A |
| Sell price | 250.00 | 250.00 | 250.00 | B | |
| Sales Budget ($) | 425,000.00 | 575,000.00 | 600,000.00 | 1,600,000.00 | C=A*B |
| Material Purchase Budget | October | November | December | Total | January | Note |
| Budgeted sales units | 1,700.00 | 2,300.00 | 2,400.00 | 6,400.00 | 1,300.00 | See A |
| Add: Closing | 690.00 | 720.00 | 390.00 | 390.00 | D= 30% of A of next month. | |
| Less: Opening | 650.00 | 690.00 | 720.00 | 650.00 | E= 30% of A of same month. For October its inventory of 30th September. | |
| Material Purchase Budget | 1,740.00 | 2,330.00 | 2,070.00 | 6,140.00 | F | |
| Purchase price | 120.00 | 120.00 | 120.00 | G | ||
| Material Purchase Budget ($) | 208,800.00 | 279,600.00 | 248,400.00 | 736,800.00 | H=F*G |
| Workings for cash budget | ||||
| Collection Budget | October | November | December | Total |
| Budgeted Sales Revenue | 425,000.00 | 575,000.00 | 600,000.00 | 1,600,000.00 |
| 20% of sales in the same month | 85,000.00 | 115,000.00 | 120,000.00 | 320,000.00 |
| 50% of sales in the next month | 245,000.00 | 212,500.00 | 287,500.00 | 745,000.00 |
| 30% of sales in the second month | - | - | 127,500.00 | 127,500.00 |
| Total Scheduled Collections | 330,000.00 | 327,500.00 | 535,000.00 | 1,192,500.00 |
| Note I: Accounts Receivable | Amount $ |
| 30% of November | 172,500.00 |
| 80% of December | 480,000.00 |
| Accounts Receivable for 2020 | 652,500.00 |
| Cash disbursement for materials | October | November | December | Total |
| Material Purchase Budget ($) | 208,800.00 | 279,600.00 | 248,400.00 | 736,800.00 |
| 100% paid in next month | 148,800.00 | 208,800.00 | 279,600.00 | 637,200.00 |
| Cash disbursement for materials | 148,800.00 | 208,800.00 | 279,600.00 | 637,200.00 |
| Note J: Accounts payable | Amount $ |
| 100% of purchases of December | 248,400.00 |
| Cash budget | October | November | December | Total |
| Beginning Cash Balance | 30,000.00 | 42,450.00 | 20,000.00 | 30,000.00 |
| Plus: Collections | 330,000.00 | 327,500.00 | 535,000.00 | 1,192,500.00 |
| Cash Available | 360,000.00 | 369,950.00 | 555,000.00 | 1,222,500.00 |
| Disbursements | ||||
| Material Payment | 148,800.00 | 208,800.00 | 279,600.00 | 637,200.00 |
| Variable cash expenses | 148,750.00 | 201,250.00 | 210,000.00 | 560,000.00 |
| Fixed cash expenses | 20,000.00 | 20,000.00 | 20,000.00 | 60,000.00 |
| Total cash payments | 317,550.00 | 430,050.00 | 509,600.00 | 1,257,200.00 |
| Ending cash balance before financing | 42,450.00 | (60,100.00) | 45,400.00 | (34,700.00) |
| Financing | ||||
| Borrowings | - | 80,100.00 | - | 80,100.00 |
| Repayments | - | - | (25,400.00) | (25,400.00) |
| Interest paid | - | - | - | - |
| Total effects of financing | - | 80,100.00 | (25,400.00) | 54,700.00 |
| Ending cash balance | 42,450.00 | 20,000.00 | 20,000.00 | 20,000.00 |
| Income Statement | October | November |
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