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Budgeting

Practice questions

Question 1
Amar Products Ltd has been in business for several years. They are preparing their budget for the four months starting on 1 January 2007. Estimated sales are: Sales RM 15,000 18,000 12,000 13,000 15,000 14,000 16,000

November December January February March April May

• Purchases are made one month before sale and cost 45% of the sales value. They are paid for in cash. • All sales are on credit. It is expected that 35% will pay one month after the sale and 65% two months after the sale. • Salaries of RM6,500 will be paid each month; • Gas and electricity of RM400 per month is payable quarterly on the last day of February, May, August and November of each year, in respect of the three months ending on that day. • Rent is due every quarter in advance in January, April, July and October. Rent for the year ended 31 March 2006 is RM1,800 per quarter. This will increase to RM2,100 per quarter for the year starting in April 2006 • Interest on investments of RM2,000 will be received in March. • Loan interest of RM5,000 will be paid in January • On I January Amar Products Ltd expect to have RM2,000 in the bank Required Prepare a cash budget, month-by-month, for the period 1 January to 30 April. Assume that overdraft facilities will be available, if needed.

Forecast sales for the following four months are: December 2006 January 2007 February 2007 March 2007 RM 70. June. They are preparing their budget for the four months starting on 1 December 2006.000 are payable each month.000 will be received in December. 40% is received in the month after the sale is made and the remaining 60% is received two months after the sale.Budgeting Practice questions Question 2 Dermot Distribution has been in business for several years. The bank balance on 30 November is expected to be RM5.000 All the sales are on credit terms. Goods are bought within the month of sale and cost 55% of the sales value.000. Sales for October 2006 were RM65. The company intends to purchase a fixed asset in March for RM12. August and November. month-by-month. Included in general expenses is an amount of depreciation amounting to RM6. Assume that overdraft facilities will be available. for the period 1 December to 31 March.000 RM 90. Suppliers are paid one month after the goods are received.000 RM 75. On average.000 per quarter is payable every quarter in advance in February. Rent of RM4. May.000. if needed.000 RM 80.000 Required Prepare a cash budget. . General expenses of RM36. Interest of RM5.000 Gas and electricity of RM700 per month is payable on the last day of March. September and December.000 and for November 2006 are expected to be RM75.

for the period 1 December to 31 March. They expect to make the following sales: November 2006 December 2006 January 2007 February 2007 March 2007 April 2007 £ 75. Interest of £4. Rent of £4.Budgeting Practice questions Question 3 Ephraim Emporium Ltd is preparing its budget for the four months starting on 1 December 2006. The remainder are expected to pay in the month after the sale. Gas and electricity of £400 per month is payable quarterly in February. Goods are bought one month prior to sale and are paid for 2 months later.000 £ 55. June.000 are payable each month.000 Required Prepare a cash budget. September and December. The company will pay a dividend of £6. month-by-month.000 will be received in December. General expenses of £17.000 in March. The bank balance on 30 November is expected to be £1. May.000 a quarter is payable in advance in March.000 40% of sales are for cash. Assume that overdraft facilities will be available.000 £ 100. . August and November. Purchases cost 70% of the sales value.000 £ 50.000 £ 60. if needed.000 £ 65.