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QUESTION THREE Easy Spread Ltd is a food processing company whose main product is margarine. The...

QUESTION THREE
Easy Spread Ltd is a food processing company whose main product is margarine. The CEO, Grant, is contemplating expanding the business by selling its margarine products into the growing Indonesian market. He asks you, as the company’s accountant, whether financial planning structures and processes within the company are set up to deal with this expansion of operations and greater financial complexity associated with export trading.
You know that the company has developed very detailed processes for preparing its production and cash budgets. But other areas of budgeting, especially financial, and capital budgets have not been formally established. You tell the CEO you will look into it and provide him with advice in next month’s meeting.
The budget committee of the company has provided the following information:
· Cash sales are 70% of total sales.
· Debtors are expected to pay: 60% of in the month of sales; and 40% in the month following the sale.
2019 Sales
April $400,000 Actual sales
May $400,000 Actual sales
June $700, 000 Estimated sales
July $900,000 Estimated sales
REQUIRED:
(a) Prepare a schedule of expected receipts from debtors for June and July 2019. (Show all workings as part of your answer).
(b) Distinguishes between the various types of budgets and their purpose that the company should put in place as part of the overall planning and control process. (limit 120 words)
(c) Provide three examples of how the sales budget will impact budgets set in other related parts of the organization. (limit 60 words)
(d) Discuss the steps that would be necessary to establish a fully integrated set of budgets that will enable effective planning and control for the company in the future and gain positive co-ordination and behavioral change necessary to attain corporate objectives. (limit 90 words)

(e) Discuss one major advantage and disadvantage Net Present Value has as a capital evaluation technique as compared to other techniques such as Payback and Internal Rate of Return. (80 words)

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