Assignment - Cash budget
TechCo Ltd is a retail distributor for MZB-33 computer hardware units. Sales forecasts for the first six months of 2014 are as follows:
|
|
Units
|
Dollars
|
|
January
|
130
|
390,000
|
|
February
|
120
|
360,000
|
|
March
|
110
|
330,000
|
|
April
|
90
|
270,000
|
|
May
|
100
|
300,000
|
|
June
|
125
|
375,000
|
|
Total
|
675
|
2,025,000
|
Total sales consist of 25% cash sales, 30% credit cards sales and 45% sales on account. The cash sales and cash from credit cards sales are received in the month of sale. Credit card sales are subject to a 4% discount. The cash receipts for sales on account are 70% in the month following the sale and 28% in the second month after the sale. The remaining 2% are estimated to be uncollectable.
TechCo's month end inventory requirement for computer hardware units is 30% of the next month's sales. The purchase price is $1800 per unit. Approximately 60% of the purchases in a month are paid in that month and the rest paid in the following month.
Selling and administration expenses are equal to 10% of the current month's sales, including $2000 of depreciation. These expenses are paid as incurred.
Required:
1. What are the four elements of the budgeting cycle?
2. Prepare a schedule of cash collections for April 2014.
3. Prepare the budgets for purchases in units and in dollars for the months of March and April.
4. Prepare a schedule of cash payments for April 2014.
5. Prepare a cash budget for April 2014, assuming the cash balance as of 1 April is $10,000.