Master budgeting
Jaya Sdn. Bhd. is a wholesaler. The mangement of Jaya Sdn. Bhd. has been extremely worried about the company's cash position over the last few years. In July 2015, they seek your advice and ask you to prepare a cash budget.
The estimated sales for the six months to December 2015 are as follows:
|
|
July
|
August
|
September
|
October
|
November
|
December
|
|
Credit Sales ($)
|
122,000
|
137,000
|
142,000
|
148,000
|
134,000
|
126,000
|
|
Cash Sales ($)
|
12,900
|
14,500
|
17,700
|
20,100
|
15,000
|
12,600
|
Cash is received immediately on cash sales. The company allows customers one month's credit on sales other than for cash.Purchase of goods for resale is made on credit. The company receives two months' credit on these purchases. The purchases for the six months to December 2015 are as follows:
|
|
July
|
August
|
September
|
October
|
November
|
December
|
|
Purchases ($)
|
62,000
|
58,000
|
71,000
|
80,000
|
54,000
|
48,000
|
An inventory check at the end of the last year has revealed $45,000 of inventory, valued at cost, is considered obsolete. The company is currently negotiating the sale of this inventory for $9,500 and anticipates payment in November 2015.
Jaya Sdn. Bhd's manufacturing overheads are estimated to be $12,000 per month. This includes a charge for depreciation of $2,000 per month. The company takes one month to pay these expenses.
Selling and distribution expenses are estimated to be $50,400 per year and are incurred evenly over the year. One month's credit is taken.
The company is currently negotiating an advertising programme with an agency. The cost will be $6,300 in November and $7,700 in December. Payment will be made in cash.
In December the company anticipates paying $3,880 tax to LembagaHasilDalamNegeri.
The company has agreed to purchase new stock handling equipment. The cost of $105,200 is payable in two equal instalments in October and November 2015.
The company expects in December to be able to take advantage of adjacent property (cost of $150,000) to expand their operation.
It is estimated that the cash balance at 1 October will be $16,000.
Required:
a) Prepare a cash budget for the months of October, November and December 2015.
b) Write a report on the cash position over this period, and in particular on ways in which you think it could be improved.