TABANI’S SCHOOL OF ACCOUNTANCY

CASH BUDGET
ABC Ltd started his business on 1 November 2004 with share capital of Rs.200,000. It
received Rs.100,000 in enterprise grants from a regional enterprise company and has
negotiated Rs.325,000 from a local bank. At the commencement of the business the company
bought cutting and sewing machine costing Rs.130,000 and fixture and fittings of Rs.11,000.
ABC will sell a small range of products each with similar cost structure and sold at similar
price.
Selling price Rs. 15
Cost

Direct labour Rs. 6.50

Direct material Rs. 3.25
Variable overhead Rs. 1.50
Fixed overheads are property expenses of Rs.240,000 per annum paid monthly in advance
and energy cost of Rs.115,200 are paid quarterly in arrears in February, May, August and
November. Other fixed costs are estimated at Rs.15,000 per month to be paid monthly.
Forecast unit sales are as follows:
Nov Nil
Dec 20,000 units
Jan 24,000 units
Feb 24,000 units
Mar 22,000 units
Apr 20,000 units
May 26,000 units
The planned production profile is as follows:
Nov 24,000 units
Dec 24,000 units
Jan 22,000 units
Feb 20,000 units
Mar 26,000 units
Apr 26,000 units
May 28,000 units
50% of sales are for cash. The remainders are credit sales. All credit sales will be paid in the
month following sale.
Material purchase are paid for in the month incurred. Variable overheads and direct labour
are paid in the month they are incurred. Bank charges i-e interest on overdraft @ 1% per
month, calculate on the closing balance at the end of the month. Interest is paid on the first
banking day of the following month.
Required:
Prepare monthly cash budget from November to May.
From the desk of Majid Masood Page 1 of 1