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1. Prepare cash budget from following details given by Beeta Ltd. The budget is to be prepared for January to April 2009
December 2008 January 2009 February 2009 March 2009 April 2009
Sales (Units) 60 60 65 75 80
Selling Price (Rs.) 1000 1000 1000 1000 1000
Off Season Discount 20% 20% 10% - -
Inventory at end of month (Unit) 10 12 15 25 25
Additional Data:
a. Half of sales is collected in month of sale and remaining in next month.
b. Materials costing Rs. 300 per unit are purchased after considering sales and invento¬ries. Payment is made 50% in month of purchase and balance in next month.
c. Administration expenses are estimated at Rs. 60,000 p.m. upto February and Rs. 72,000 p.m. thereafter. 60% of amount is payable in relevant month and balance in subsequent month.
d. Selling expenses are @ Rs. 100 per unit. Payable one month after sales.
e. A machine costing Rs. 50,000 was to be purchased in January, against payment of 20%. Balance is payable by four quarterly installments of equal amount.
f. Income tax payable in March - Rs. 12,000.
g. Dividend payable in April - Rs. 25,000.
h. The company needs minimum cash balance of Rs. 20,000. However, balance at end of December is Rs. 25,000.
i. The company has made arrangement with bank for overdraft of Rs. 60,000.
2. Suman and Sohan are equal partners on 1-4-2004, their Balance Sheet included Plant Rs. 6,00,000; Premises is Rs. 3,00,000. Stock Rs. 30,000, Bank Rs. 20,000 and Goodwill Rs. 50,000. On same date, Sosun Ltd. is incorporated to take over the business of above firm. The consideration is settled on 1-4-2004 by issuing 40,000 - Equity shares of the 10% at par. The balance is payable in equal amount on 30-6-2004 and 30-9-2004, together with interest @ 12% p.a. on unpaid balance. On 30-6-2004 company purchased a Delivery van at cost of Rs. 1,60,000 under Hire Purchase System. The down payment is Rs. 60,000 and balance in monthly installments of Rs. 10,000 each from July. The Selling Price is Rs. 200 per unit. The cost of purchase is 60% of selling price. The estimated sales (in Units) are
April 400 July 800
May 400 August 800
June 600 September 800
The stock level will remain unchanged.
The administration expenses will Rs. 5,000 per month till June and Rs. 8,000 thereafter. The office and godown rent is Rs. 2,000 p.m.
Sales Commission is @ 5% of Sales.
The credit periods are:
Sales - 20% on cash basis remaining on credit of two months.
Purchase - 30% on cash basis remaining on credit of one month.
Selling commission - one month after sales.
Other expense at the end of relevant month.
The company needs minimum bank balance of Rs. 10,000. It has arranged for overdraft limit of Rs. 1,00,000 to be utilized as per actual needs.
Prepare cash budget for April 2004 to September 2004.
3. Mr. Ajit proposes to market product 'Sahayak'. The product requires only assembly of components. He has spent Rs. 30,000 from his savings for development of product.
The equipment for assembly will cost Rs. 60,000 and place for assembly will cost Rs. 40,000. The expected sales for first six months are 50 units, 50 units, 100 units, 150 units, 200 units and 200 units. He is not interested to increase sales beyond 200 units P.M. He will need 50 units for demonstration and display to be supplied in first month.
The retail selling price of product will be Rs. 300 per unit, but trade discount @ 20% will be allowed to the customer / dealer.
The components for assembly can be purchased @ Rs. 150 per unit. The credit allowed and enjoyed will be one month.
The wage cost for assembly upto 200 units will be Rs. 5,000 p.m. The supervisor for operation will be employed @ Rs. 800 p.m. The other expenses will be Rs. 3,000 p.m. All these payments are to be made on cash basis.
The budget for sales promotion expense is 1st month Rs. 5,000, 2nd month Rs. 5,000, 3rd month Rs. 2,500 and 4th month Rs. 2,500. He does not propose to hold any inventory.
The bank is prepared to finance:
(a) against fixed asset with owner's margin to be 25%. This loan is repayable in 10 equal annual installments
(b) temporary overdraft upto a limit of 50% of Debtors.
You are required to prepare cash budget for six months.
4. Anil and Bimal doing business in Partnership have developed new company to manufacture a certain product. The cost of factory, land and building, is estimated at Rs. 1,50,000 and that of plant at Rs. 3,00,000 and preliminary expenses at Rs. 50,000. They have formed AB Limited on 1st January 1986. Anil and Bimal subscribed Rs. 3,00,000 towards share capital of the company.
The additional information:
a. Costs:
i. Cost Rs. 40 per unit being Rs. 20 Material and Rs. 20 Labour.
ii. Factory and Administration cost Rs. 10,000 per month.
iii. Publicity campaign Rs. 10,000 for February and Rs. 2,000 per month for subsequent months.
iv. The selling expenses Rs. 15,000 per month from February.
b. Sales:
January 2,000 units
February 3,000 units
Thereafter 4,000 units per month
Sales Price Rs. 50 per unit
c. Terms of Sales and Purchase:
Payments for purchases to be made within one month.
Sales 20% for cash
75% within one month
5% expected cash discount / bad debts
All overheads and wages to be paid within month in which they are incurred.
d. Stock:
Raw material
And finished goods
You are requested to prepare initial cash budget for January-June 1986 (excluding Fixed Assets and Capital).
5. Prepare a Cash Budget for the three months ended 30th September, 2005 based on the following information
Rs.
Cash at Bank on 1st July, 2005 25,000
Salaries and Wages estimated monthly 10,000
Interest Payable - August, 2005 5,000
Estimated June July August September
Rs. Rs. Rs. Rs.
Cash Sales (Actual) 1,40,000 1,52,000 1,21,000
Credit Sales 1,00,000 80,000 1,40,000 1,20,000
Purchases 1,60,000 1,70,000 2,40,000 1,80,000
Other Expenses - 20,000 22,000 21,000
Collections from credit sales are subject to 5% discount if payment is received during the month of purchase and 2% if payment is received in the month following. Creditors are paid either on "prompt" or 30 days basis. It is estimated that 10% of creditors are in the "prompt" category.
6. XYZ Ltd. is formed to take over a running business. It has been decided to raise Rs. 55 lakhs by issuing Equity Shares and the balance of capital required in the first six months is to be financed by a Financial Institution against an issue of Rs. 5 lakhs 8% debentures (interest payable annually) in its favor.
Initial outlay consists of
Rs.
Freehold Premises 25 lakhs
Plant and Machinery 10 lakhs
Vehicles and other items 5 lakhs
Stock 6 lakhs
Payments on above items are to be made in the month of incorporation.
Sales during the first six months ending on 30th June are estimated as under:
Rs.
January 14.00 lakhs
February 15.00 lakhs
March 18.50 lakhs
April 25.00 lakhs
May 26.50 lakhs
June 28.00 lakhs
Lag in Payments: (Debtors, Creditors Other details)
(a) Preliminary Expenses: Rs. 50,000 (Payable in February).
(b) General Expenses: Rs. 50,000 per month (at the end of each month).
(c) Monthly wages and salaries (Payable on 1st day of the next month): Rs. 80,000 for the first three months. Rs. 95,000 thereafter.
(d) The shares and debentures are to be issued on 1st January.
(e) The stock level throughout is to be the same as the outlay.
Prepare the cash budget for the period of six months from 1st January to 30th June.
7. From the following data prepare cash budget for the quarter October-December:
a. Sales for the month: Rs.
August 20,000
September 25,000
October 30,000
November 30,000
December 32,000
All sales are on credit. Half of the dues are collected in the month of sale on which a cash discount of 20% is allowed and the other half is realized next month.
b. Materials are purchased for cash on which a rebate of 5% is allowed by the supplier. If the company buys on credit, payment can be deferred by one month foregoing the rebates. The purchase budget for the next quarter is October Rs. 12,500; November Rs. 15,000 and December Rs. 18,000.
c. The direct labor budget is as under:
Month Department A Department B
October 3,000 4,000
November 3,000 4,000
December 3,200 3,8'00
d. The manufacturing overheads budget is as under:
Month General Factory
Expenses Department A Department B
October 800 2,400 1,550
November 800 2,400 1,550
December 900 2,500 1,650
The above estimates include the quarter's depreciation provision amounting to Rs. 900 for Department A and Rs. 750 for Department B.
e. The General overheads budget for the quarter is Rs. 3,500 (out of which Rs. 200 is for depreciation reserve Rs. 300 for bad debts reserve).
f. An old machine is to be replaced with an additional outlay of Rs. 7,000 in the month of December.
g. The cash balance on 1st October may be taken as Rs. 15,000.
8. Suchi Ltd. a newly started company wishes to prepare cash budget from January 2006. Prepare a Cash Budget for the first six months from the following estimated revenue and expenses.
Month Total Sales Materials Wages Production
Overheads Selling Overheads
January 20,000 20,000 4,000 3,200 800
February 22,000 14,000 4,400 3,300 900
March 28,000 14,000 4,600 3,400 900
April 16,000 22,000 4,600 3,500 1,000
May 30,000 20,000 4,000 3,200 900
June 40,000 25,000 5,000 3,600 1,200
a. Cash Balance on 1st January 2006 is expected to be Rs. 10,000. New machinery is to be installed at Rs. 20,000 on credit in January, to be paid by two equal installments in March and April.
b. Sales Commission @ 5% on total sales is to be paid within a month following the actual sales.
c. Rs. 10,000 being the amount of second call money may be received in March. Share Premium amounting to Rs. 2,000 is also obtainable along with the second call.
d. Period of Credit allowed by suppliers - Two months
e. Period of Credit allowed to customers - One month
f. Delay in Payment of Overheads - One month
g. Delay in Payment of Wages - One-half month
h. Assume Cash Sales to be 50% of total sales.
i. Depreciation is provided at 33.33% p.a. distributed uniformly per month
9. Titu Ltd. a newly started company wishes to prepare cash budget from April, 2006. Prepare a cash budget for the six months from the following estimated revenue and expenses
Month Sales Purchases Wages Production
Overheads Office
Overheads
April 7,200 2,500 1,000 600 550
May 9,700 3,100 1,210 630 670
June 8,600 2,550 1,060 600 750
July 8,860 3,060 2,500 650 890
August 10,250 3,700 2,200 800 1,100
September 10,870 3,880 2,300 820 1,150
Sale includes cash sales which is 50% of Total Sales.
New machinery is to be installed in the month of May and July. Therefore provisions should be made for the payment of Rs. 800 and 2,500 respectively.
A Grant of Bank Loan is expected in the month of August of Rs. 3,000. It was anticipated that a dividend of Rs. 3,500 will be paid by the company in September.
Period of Credit allowed by Suppliers - One Month
Period of Credit allowed to Customers - One Month
Delay in payment of both overheads - One Month
Sales commissions to agents at 3% on Total Sales are paid in each month.
Cash Balance in hand on 1st April, 2006 is Rs. 7,250.
10. Parse Pvt. Ltd. was formed in 2005 for the purpose of carrying on the business from 1st January, 2006. The company has issued 3,375 Equity Shares of Rs. 100 each which were fully paid up in Cash in 2005. No amount is spent in 2005 out of this money. You are informed that,
a. Fixed Assets will be purchased for cash in January, 2006 as follows:
Rs.
Machinery 1,00,000
Freehold Building 57,600
Motor Vehicles 8,000
Furniture and Fittings 5,500
1,71,000
b. Sales will be average Rs. 45,000 per month except October when they will amount to Rs. 1,80,000. The gross profit will be at a uniform rate of 30% of the selling price.
c. Payment of all sales will be received on the last day of the month after that in which goods are sold.
d. The stock in trade at the end of January, 2006 will amount to Rs. 18,000 at cost and will be maintained at this level throughout the year.
e. Goods purchased will be paid at the end of the month in which they were purchased.
f. Expenses will average Rs. 13,500 in each month except October when they will amount to Rs. 26,500. Expenses will be paid on the last day of the month in which they are incurred.
You are required to prepare summarized Cash Budget for the year 2006.
11. From the following budget data, forecast the cash position at the end of April, May and June
Month Sales Purchases Wages Expenses
February 1,20,000 84,000 10;000 7,000
March 1,30,000 1,00,000 12,000 8,000
April 80,000 1,04,000 8,000 6,000
May 1,16,000 1,06,000 10,000 12,000
June 88,000 80,000 8,000 6,000
Additional information:
a. Sales: 20% realized in the month of sale; discount allowed 2%; Balanced realized equally in two subsequent months.
b. Purchases: These are paid for in the month following the month of supply.
c. Miscellaneous Expenses: Paid a month in arrears.
d. Rent: Rs. 1,000 per month paid quarterly in advance due in April.
e. Income-tax: First installment of advance tax Rs. 25,000, due on or before the 15th June. Income from Investment: Rs. 5,000 received quarterly, April, July, etc.
f. Cash in Hand: Rs. 5,000 on 1st April, 2006.
12. From the following forecast of Income and Expenditure of Doran Enterprises prepare a Cash Budget for six months commencing from 1st July, 2006 when the Bank Balance is estimated to be 5 00 000. The following data of sales and expenses is also provided to you
Month Sales Purchases Wages Factory Admin Selling and
Distribution Research
April 4,50,000 3,00,000 20,000 40,000 10,000 10,000 5,000
May 4,00,000 2,50,000 30,000 20,000 10,000 14,000 5,000
June 5,00,000 3,50,000 40,000 40,000 15,000 16,000 5,000
July 6,00,000 4,00,000 45,000 30,000 12,000 15,000 6,000
Aug. 7,00,000 5,00,000 50,000 50,000 20,000 18,000 6,000
Sept. 8,00,000 6,00,000 60,000 50,000 25,000 16,000 7,000
Oct. 10,00,000 8,00,000 55,000 45,000 16,000 18,000 8,000
Nov. 10,00,000 6,00,000 50,000 40,000 22,000 20,000 8,000
Dec. 8,00,000 7,00,000 60,000 55,000 25,000 16,000 8,000
Additional information:
a. A sales commission of 5% on sales and due two months after sales is payable in addition to selling overheads.
b. 10% of the sales and 20% of the purchases will be made for cash at a discount of 10% in both cases.
c. Period of credit allowed to customers is two months but 50% of the customers pay after one month.
d. Lag in payment of wages and all overheads are 1/5 and 1/2 months respectively.
e. Interest on Government Bonds amounting to Rs. 50,000 is to be received in October, 2006.
f. Preference dividend of Rs. 1,00,000 is to be paid in September, 2006.
g. A call of Rs. 20 per share on Equity share capital of Rs. 50,00,000 divided into 5,00,000 shares of Rs. 100 each is to be received on 1st August, 2006.
h. A plant costing Rs. 6,00,000 will have to be installed in July. One-fourth of the amount is to be paid at the time of installation and the balance by three equal quarterly installments.
13. The Directors of Vishwanath Company have the following plan for the six-month period commencing from July 2006, Sales - Rs. 4,50,000 at a gross profit of 25%. Sales during the period July to September will be on an even basis each month. In each of the last three months, Sales will be twice as much as in each of the earlier months, 10% of sales will be for cash.
Inventory: At the end of June 2006 will be Rs. 4,50,000, thereafter adequate to supply the expected sales of the following month.
Purchases: As necessary to pursue the sale and inventory policy.
Expenses:
Wages and salaries at the rate of Rs. 40,000 each month payable on the first day of following month.
General expenses at the rate of Rs. 30,000 per month payable on the last date of each month.
Rents, Rs. 40,000 per annum payable quarterly, in the second month of each quarter.
Terms of Credit: Debtors to settle their accounts in the second month following the month of sale. Debtors as at 30th June 2006 amount to Rs. 9,00,000 representing credit sales for:
April Rs. 2,50,000; May Rs. 3,00,000; and June Rs. 3,50,000. Creditors to be paid at the end of the month following the month of purchase. Creditors as at 30th June 2006 amount to Rs. 4,00,000 representing. Purchases in May and June @ Rs. 2,00,000 each month.
Dividend of Rs. 2,50,000 is to be paid in July and advance income-tax amounting to As. 3,00,000 will be paid on 15th September 2006. Capital expenditure amounting to Rs. 40,000 will be incurred in September, to be paid in the following month. Bonus to staff at the rate of 2 month's gross wages will be paid to Staff in August.
Draw up a Cash forecast and ascertain the deficit in cash, if any, the company is expected to face.
14. Make out Cash Budget of Mansee Products for October to December from the following information
(1) Cash and Bank Balances on 1-10-2005 As. 20,000.
(2) Actual and Budgeted Sales:
June Rs. 60,000 (Actual)
July Rs. 65,000 (Actual)
August Rs. 70,000 (Actual)
September Rs. 75,000 (Budgeted)
October Rs. 80,000 (Budgeted)
November Rs. 82,000 (Budgeted)
December Rs. 89,000 (Budgeted)
(3) Purchases - Actual and Budgeted Figures are:
June Rs. 36,000 (Actual)
July Rs. 40,000 (Actual)
August Rs. 48,000 (Actual)
September Rs. 45,000 (Actual)
October Rs. 48,000 (Budgeted)
November Rs. 40,000 (Budgeted)
December Rs. 50,000 (Budgeted)
(4) Wages and Other Expenses - Actual and Budgeted
Wages Expenses
August (Actual) Rs. 15,000 Rs. 5,000
September (Actual) Rs. 15,000 Rs. 6,000
October (Budget) Rs. 18,000 Rs. 6,000
November (Budget) Rs. 18,000 Rs. 8,000
December (Budget) Rs. 20,000 Rs. 8,000
(5) Special:
Advance Income Tax Rs. 5,000 in November.
Plant - Rs. 10,000 in October.
(6) Rs. 300 Rent payable in advance.
(7) 10% Purchases and Sales are on cash term.
(8) Time lag:
Credit Sales - 2 months.
Credit Purchases - 1 month.
Wages - 1/2 month.
Expenses - 1/4 month
15. ST Enterprise manufactures a single product with capacity of 500 units p.m. at 100% capacity. Its cost structure is:
Material Cost Rs. 30 per unit
Wages Cost Rs. 20 per units
Variable Production Expenses Rs. 10 per units
Variable Sales Expenses Rs. 10 per units
Fixed Administrative Expenses Rs. 7,500 p.m.
Fixed Factory Expenses Rs. 10,000 p.m.
Sales Price Rs. 125
The expected Sales:
January to March 2006 300 units p.m.
April to June 2006 400 units p.m.
25% of Sales are for Cash
The particulars of credit allowed / enjoyed:
a. 60% of credit sales are realized in month following the month of sales and remaining in the subsequent month.
b. 25% of purchase price is payable against delivery and remaining in following month.
c. Wages are payable on 7th of following month.
d. All other expenses are payable in same month to which it pertains
e. Rs. 15,000 is payable as income tax on 15th June.
f. Rs. 10,000 is receivable as interest on 20th May.
g. Cash on Hand expected on 1st April 2006 is Rs. 15,000.
You are required to prepare the Cash Budget for period April to June 2006 and ascertain cash balance at end of each month.
16. From the following prepare Cash Budget 132006 to 3182006. Opening Cash Balance with Rs.40,000
Month Sales Selling
Expenses Purchases Wages Factory
Expenses Admin
Expenses
January 3,40,000 7,000 80,000 15,000 10,000 5,000
February 3,20,000 7,500 84,000 16,000 11,000 5,500
March 3,64,000 6,500 83,000 16,800 8,000 4,500
April 3,10,000 6,800 83,000 12,000 10,500 4,700
May 3,30,000 7,400 76,000 18,000 12,000 5,400
June 4,00,000 7,000 68,000 16,000 9,600 5,700
July 3,60,000 6,000 70,000 17,000 8,000 5.000
August 4,40,000 5,500 58,000 16,500 9,600 5,500
a. One month credit is allowed by the suppliers and to the customers.
b. Lag in Payment:
Wages 1/8 Month
Factory Expenses 1 Month,
Administration Expenses 1 Month,
Selling Expenses 1 Month.
c. Machinery purchased for Rs. 1,00,000 in March payable on delivery.
d. Building purchased in April Rs. 1,50,000 payable in equal installments in May and July.
e. Commission @ 3% on sales payable two months after sales.
17. M/s. Delta Enterprises produces a single product that sells for Rs. 75 per unit. The cost data is:
a. Variable manufacturing expenses are Rs. 35 per unit. .
b. Variable selling and administrative expenses are Rs. 5 per unit sold.
c. Fixed manufacturing costs requiring cash are Rs. 2,50,000 per month.
d. Fixed selling and administrative expenses are Rs. 2,00,000 per month, all requiring cash.
e. Depreciation is Rs. 60,000 per month.
f. Other relevant data is:
Finished stock is kept equal to sales requirements for the next two months budgeted sales. The opening finished stock (January, 1) is 42,000 units.
The firm does not hold raw materials inventory, and purchases raw material as needed.
The cost of raw materials is included in the variable manufacturing cost of Rs. 35.
The firm has a practice of making all sales on credit, collecting 30% in the month of sale and the balance in the following month. There are no bad debts and no overdue accounts. Opening Debts (on January, 1) balance is Rs. 7,00,000.
The firm pays all manufacturing costs in the month of production.
The firm pays four-fifths of selling and administrative expenses in the month of sale, and the balance one-fifth is paid in the following month. On 1st January, the firm owed Rs. 70,000 for December selling and distribution expenses (Rs. 30,000 variable and Rs. 40,000 fixed).
The minimum desired cash balance is Rs. 80,000, which is also the amount the firm has on 1st January. Borrowings can be made in multiples of 10,000 and can be repaid in multiples of Rs. 10,000. The company must borrow at the beginning of a month and repay at the end of a month if sufficient cash is not available. The interest rate is 10% p.a. and the firm pays interest when it repays loans or portions of them.
g. The sales budget for the first six months in units is:
January 20,000
February 26,000
March 30,000
April 32,000
May 30,000
June 28,000
You are required to prepare a Cash Budget for the months of January, February and March.
December 2008 January 2009 February 2009 March 2009 April 2009
Sales (Units) 60 60 65 75 80
Selling Price (Rs.) 1000 1000 1000 1000 1000
Off Season Discount 20% 20% 10% - -
Inventory at end of month (Unit) 10 12 15 25 25
Additional Data:
a. Half of sales is collected in month of sale and remaining in next month.
b. Materials costing Rs. 300 per unit are purchased after considering sales and invento¬ries. Payment is made 50% in month of purchase and balance in next month.
c. Administration expenses are estimated at Rs. 60,000 p.m. upto February and Rs. 72,000 p.m. thereafter. 60% of amount is payable in relevant month and balance in subsequent month.
d. Selling expenses are @ Rs. 100 per unit. Payable one month after sales.
e. A machine costing Rs. 50,000 was to be purchased in January, against payment of 20%. Balance is payable by four quarterly installments of equal amount.
f. Income tax payable in March - Rs. 12,000.
g. Dividend payable in April - Rs. 25,000.
h. The company needs minimum cash balance of Rs. 20,000. However, balance at end of December is Rs. 25,000.
i. The company has made arrangement with bank for overdraft of Rs. 60,000.
2. Suman and Sohan are equal partners on 1-4-2004, their Balance Sheet included Plant Rs. 6,00,000; Premises is Rs. 3,00,000. Stock Rs. 30,000, Bank Rs. 20,000 and Goodwill Rs. 50,000. On same date, Sosun Ltd. is incorporated to take over the business of above firm. The consideration is settled on 1-4-2004 by issuing 40,000 - Equity shares of the 10% at par. The balance is payable in equal amount on 30-6-2004 and 30-9-2004, together with interest @ 12% p.a. on unpaid balance. On 30-6-2004 company purchased a Delivery van at cost of Rs. 1,60,000 under Hire Purchase System. The down payment is Rs. 60,000 and balance in monthly installments of Rs. 10,000 each from July. The Selling Price is Rs. 200 per unit. The cost of purchase is 60% of selling price. The estimated sales (in Units) are
April 400 July 800
May 400 August 800
June 600 September 800
The stock level will remain unchanged.
The administration expenses will Rs. 5,000 per month till June and Rs. 8,000 thereafter. The office and godown rent is Rs. 2,000 p.m.
Sales Commission is @ 5% of Sales.
The credit periods are:
Sales - 20% on cash basis remaining on credit of two months.
Purchase - 30% on cash basis remaining on credit of one month.
Selling commission - one month after sales.
Other expense at the end of relevant month.
The company needs minimum bank balance of Rs. 10,000. It has arranged for overdraft limit of Rs. 1,00,000 to be utilized as per actual needs.
Prepare cash budget for April 2004 to September 2004.
3. Mr. Ajit proposes to market product 'Sahayak'. The product requires only assembly of components. He has spent Rs. 30,000 from his savings for development of product.
The equipment for assembly will cost Rs. 60,000 and place for assembly will cost Rs. 40,000. The expected sales for first six months are 50 units, 50 units, 100 units, 150 units, 200 units and 200 units. He is not interested to increase sales beyond 200 units P.M. He will need 50 units for demonstration and display to be supplied in first month.
The retail selling price of product will be Rs. 300 per unit, but trade discount @ 20% will be allowed to the customer / dealer.
The components for assembly can be purchased @ Rs. 150 per unit. The credit allowed and enjoyed will be one month.
The wage cost for assembly upto 200 units will be Rs. 5,000 p.m. The supervisor for operation will be employed @ Rs. 800 p.m. The other expenses will be Rs. 3,000 p.m. All these payments are to be made on cash basis.
The budget for sales promotion expense is 1st month Rs. 5,000, 2nd month Rs. 5,000, 3rd month Rs. 2,500 and 4th month Rs. 2,500. He does not propose to hold any inventory.
The bank is prepared to finance:
(a) against fixed asset with owner's margin to be 25%. This loan is repayable in 10 equal annual installments
(b) temporary overdraft upto a limit of 50% of Debtors.
You are required to prepare cash budget for six months.
4. Anil and Bimal doing business in Partnership have developed new company to manufacture a certain product. The cost of factory, land and building, is estimated at Rs. 1,50,000 and that of plant at Rs. 3,00,000 and preliminary expenses at Rs. 50,000. They have formed AB Limited on 1st January 1986. Anil and Bimal subscribed Rs. 3,00,000 towards share capital of the company.
The additional information:
a. Costs:
i. Cost Rs. 40 per unit being Rs. 20 Material and Rs. 20 Labour.
ii. Factory and Administration cost Rs. 10,000 per month.
iii. Publicity campaign Rs. 10,000 for February and Rs. 2,000 per month for subsequent months.
iv. The selling expenses Rs. 15,000 per month from February.
b. Sales:
January 2,000 units
February 3,000 units
Thereafter 4,000 units per month
Sales Price Rs. 50 per unit
c. Terms of Sales and Purchase:
Payments for purchases to be made within one month.
Sales 20% for cash
75% within one month
5% expected cash discount / bad debts
All overheads and wages to be paid within month in which they are incurred.
d. Stock:
Raw material
And finished goods
You are requested to prepare initial cash budget for January-June 1986 (excluding Fixed Assets and Capital).
5. Prepare a Cash Budget for the three months ended 30th September, 2005 based on the following information
Rs.
Cash at Bank on 1st July, 2005 25,000
Salaries and Wages estimated monthly 10,000
Interest Payable - August, 2005 5,000
Estimated June July August September
Rs. Rs. Rs. Rs.
Cash Sales (Actual) 1,40,000 1,52,000 1,21,000
Credit Sales 1,00,000 80,000 1,40,000 1,20,000
Purchases 1,60,000 1,70,000 2,40,000 1,80,000
Other Expenses - 20,000 22,000 21,000
Collections from credit sales are subject to 5% discount if payment is received during the month of purchase and 2% if payment is received in the month following. Creditors are paid either on "prompt" or 30 days basis. It is estimated that 10% of creditors are in the "prompt" category.
6. XYZ Ltd. is formed to take over a running business. It has been decided to raise Rs. 55 lakhs by issuing Equity Shares and the balance of capital required in the first six months is to be financed by a Financial Institution against an issue of Rs. 5 lakhs 8% debentures (interest payable annually) in its favor.
Initial outlay consists of
Rs.
Freehold Premises 25 lakhs
Plant and Machinery 10 lakhs
Vehicles and other items 5 lakhs
Stock 6 lakhs
Payments on above items are to be made in the month of incorporation.
Sales during the first six months ending on 30th June are estimated as under:
Rs.
January 14.00 lakhs
February 15.00 lakhs
March 18.50 lakhs
April 25.00 lakhs
May 26.50 lakhs
June 28.00 lakhs
Lag in Payments: (Debtors, Creditors Other details)
(a) Preliminary Expenses: Rs. 50,000 (Payable in February).
(b) General Expenses: Rs. 50,000 per month (at the end of each month).
(c) Monthly wages and salaries (Payable on 1st day of the next month): Rs. 80,000 for the first three months. Rs. 95,000 thereafter.
(d) The shares and debentures are to be issued on 1st January.
(e) The stock level throughout is to be the same as the outlay.
Prepare the cash budget for the period of six months from 1st January to 30th June.
7. From the following data prepare cash budget for the quarter October-December:
a. Sales for the month: Rs.
August 20,000
September 25,000
October 30,000
November 30,000
December 32,000
All sales are on credit. Half of the dues are collected in the month of sale on which a cash discount of 20% is allowed and the other half is realized next month.
b. Materials are purchased for cash on which a rebate of 5% is allowed by the supplier. If the company buys on credit, payment can be deferred by one month foregoing the rebates. The purchase budget for the next quarter is October Rs. 12,500; November Rs. 15,000 and December Rs. 18,000.
c. The direct labor budget is as under:
Month Department A Department B
October 3,000 4,000
November 3,000 4,000
December 3,200 3,8'00
d. The manufacturing overheads budget is as under:
Month General Factory
Expenses Department A Department B
October 800 2,400 1,550
November 800 2,400 1,550
December 900 2,500 1,650
The above estimates include the quarter's depreciation provision amounting to Rs. 900 for Department A and Rs. 750 for Department B.
e. The General overheads budget for the quarter is Rs. 3,500 (out of which Rs. 200 is for depreciation reserve Rs. 300 for bad debts reserve).
f. An old machine is to be replaced with an additional outlay of Rs. 7,000 in the month of December.
g. The cash balance on 1st October may be taken as Rs. 15,000.
8. Suchi Ltd. a newly started company wishes to prepare cash budget from January 2006. Prepare a Cash Budget for the first six months from the following estimated revenue and expenses.
Month Total Sales Materials Wages Production
Overheads Selling Overheads
January 20,000 20,000 4,000 3,200 800
February 22,000 14,000 4,400 3,300 900
March 28,000 14,000 4,600 3,400 900
April 16,000 22,000 4,600 3,500 1,000
May 30,000 20,000 4,000 3,200 900
June 40,000 25,000 5,000 3,600 1,200
a. Cash Balance on 1st January 2006 is expected to be Rs. 10,000. New machinery is to be installed at Rs. 20,000 on credit in January, to be paid by two equal installments in March and April.
b. Sales Commission @ 5% on total sales is to be paid within a month following the actual sales.
c. Rs. 10,000 being the amount of second call money may be received in March. Share Premium amounting to Rs. 2,000 is also obtainable along with the second call.
d. Period of Credit allowed by suppliers - Two months
e. Period of Credit allowed to customers - One month
f. Delay in Payment of Overheads - One month
g. Delay in Payment of Wages - One-half month
h. Assume Cash Sales to be 50% of total sales.
i. Depreciation is provided at 33.33% p.a. distributed uniformly per month
9. Titu Ltd. a newly started company wishes to prepare cash budget from April, 2006. Prepare a cash budget for the six months from the following estimated revenue and expenses
Month Sales Purchases Wages Production
Overheads Office
Overheads
April 7,200 2,500 1,000 600 550
May 9,700 3,100 1,210 630 670
June 8,600 2,550 1,060 600 750
July 8,860 3,060 2,500 650 890
August 10,250 3,700 2,200 800 1,100
September 10,870 3,880 2,300 820 1,150
Sale includes cash sales which is 50% of Total Sales.
New machinery is to be installed in the month of May and July. Therefore provisions should be made for the payment of Rs. 800 and 2,500 respectively.
A Grant of Bank Loan is expected in the month of August of Rs. 3,000. It was anticipated that a dividend of Rs. 3,500 will be paid by the company in September.
Period of Credit allowed by Suppliers - One Month
Period of Credit allowed to Customers - One Month
Delay in payment of both overheads - One Month
Sales commissions to agents at 3% on Total Sales are paid in each month.
Cash Balance in hand on 1st April, 2006 is Rs. 7,250.
10. Parse Pvt. Ltd. was formed in 2005 for the purpose of carrying on the business from 1st January, 2006. The company has issued 3,375 Equity Shares of Rs. 100 each which were fully paid up in Cash in 2005. No amount is spent in 2005 out of this money. You are informed that,
a. Fixed Assets will be purchased for cash in January, 2006 as follows:
Rs.
Machinery 1,00,000
Freehold Building 57,600
Motor Vehicles 8,000
Furniture and Fittings 5,500
1,71,000
b. Sales will be average Rs. 45,000 per month except October when they will amount to Rs. 1,80,000. The gross profit will be at a uniform rate of 30% of the selling price.
c. Payment of all sales will be received on the last day of the month after that in which goods are sold.
d. The stock in trade at the end of January, 2006 will amount to Rs. 18,000 at cost and will be maintained at this level throughout the year.
e. Goods purchased will be paid at the end of the month in which they were purchased.
f. Expenses will average Rs. 13,500 in each month except October when they will amount to Rs. 26,500. Expenses will be paid on the last day of the month in which they are incurred.
You are required to prepare summarized Cash Budget for the year 2006.
11. From the following budget data, forecast the cash position at the end of April, May and June
Month Sales Purchases Wages Expenses
February 1,20,000 84,000 10;000 7,000
March 1,30,000 1,00,000 12,000 8,000
April 80,000 1,04,000 8,000 6,000
May 1,16,000 1,06,000 10,000 12,000
June 88,000 80,000 8,000 6,000
Additional information:
a. Sales: 20% realized in the month of sale; discount allowed 2%; Balanced realized equally in two subsequent months.
b. Purchases: These are paid for in the month following the month of supply.
c. Miscellaneous Expenses: Paid a month in arrears.
d. Rent: Rs. 1,000 per month paid quarterly in advance due in April.
e. Income-tax: First installment of advance tax Rs. 25,000, due on or before the 15th June. Income from Investment: Rs. 5,000 received quarterly, April, July, etc.
f. Cash in Hand: Rs. 5,000 on 1st April, 2006.
12. From the following forecast of Income and Expenditure of Doran Enterprises prepare a Cash Budget for six months commencing from 1st July, 2006 when the Bank Balance is estimated to be 5 00 000. The following data of sales and expenses is also provided to you
Month Sales Purchases Wages Factory Admin Selling and
Distribution Research
April 4,50,000 3,00,000 20,000 40,000 10,000 10,000 5,000
May 4,00,000 2,50,000 30,000 20,000 10,000 14,000 5,000
June 5,00,000 3,50,000 40,000 40,000 15,000 16,000 5,000
July 6,00,000 4,00,000 45,000 30,000 12,000 15,000 6,000
Aug. 7,00,000 5,00,000 50,000 50,000 20,000 18,000 6,000
Sept. 8,00,000 6,00,000 60,000 50,000 25,000 16,000 7,000
Oct. 10,00,000 8,00,000 55,000 45,000 16,000 18,000 8,000
Nov. 10,00,000 6,00,000 50,000 40,000 22,000 20,000 8,000
Dec. 8,00,000 7,00,000 60,000 55,000 25,000 16,000 8,000
Additional information:
a. A sales commission of 5% on sales and due two months after sales is payable in addition to selling overheads.
b. 10% of the sales and 20% of the purchases will be made for cash at a discount of 10% in both cases.
c. Period of credit allowed to customers is two months but 50% of the customers pay after one month.
d. Lag in payment of wages and all overheads are 1/5 and 1/2 months respectively.
e. Interest on Government Bonds amounting to Rs. 50,000 is to be received in October, 2006.
f. Preference dividend of Rs. 1,00,000 is to be paid in September, 2006.
g. A call of Rs. 20 per share on Equity share capital of Rs. 50,00,000 divided into 5,00,000 shares of Rs. 100 each is to be received on 1st August, 2006.
h. A plant costing Rs. 6,00,000 will have to be installed in July. One-fourth of the amount is to be paid at the time of installation and the balance by three equal quarterly installments.
13. The Directors of Vishwanath Company have the following plan for the six-month period commencing from July 2006, Sales - Rs. 4,50,000 at a gross profit of 25%. Sales during the period July to September will be on an even basis each month. In each of the last three months, Sales will be twice as much as in each of the earlier months, 10% of sales will be for cash.
Inventory: At the end of June 2006 will be Rs. 4,50,000, thereafter adequate to supply the expected sales of the following month.
Purchases: As necessary to pursue the sale and inventory policy.
Expenses:
Wages and salaries at the rate of Rs. 40,000 each month payable on the first day of following month.
General expenses at the rate of Rs. 30,000 per month payable on the last date of each month.
Rents, Rs. 40,000 per annum payable quarterly, in the second month of each quarter.
Terms of Credit: Debtors to settle their accounts in the second month following the month of sale. Debtors as at 30th June 2006 amount to Rs. 9,00,000 representing credit sales for:
April Rs. 2,50,000; May Rs. 3,00,000; and June Rs. 3,50,000. Creditors to be paid at the end of the month following the month of purchase. Creditors as at 30th June 2006 amount to Rs. 4,00,000 representing. Purchases in May and June @ Rs. 2,00,000 each month.
Dividend of Rs. 2,50,000 is to be paid in July and advance income-tax amounting to As. 3,00,000 will be paid on 15th September 2006. Capital expenditure amounting to Rs. 40,000 will be incurred in September, to be paid in the following month. Bonus to staff at the rate of 2 month's gross wages will be paid to Staff in August.
Draw up a Cash forecast and ascertain the deficit in cash, if any, the company is expected to face.
14. Make out Cash Budget of Mansee Products for October to December from the following information
(1) Cash and Bank Balances on 1-10-2005 As. 20,000.
(2) Actual and Budgeted Sales:
June Rs. 60,000 (Actual)
July Rs. 65,000 (Actual)
August Rs. 70,000 (Actual)
September Rs. 75,000 (Budgeted)
October Rs. 80,000 (Budgeted)
November Rs. 82,000 (Budgeted)
December Rs. 89,000 (Budgeted)
(3) Purchases - Actual and Budgeted Figures are:
June Rs. 36,000 (Actual)
July Rs. 40,000 (Actual)
August Rs. 48,000 (Actual)
September Rs. 45,000 (Actual)
October Rs. 48,000 (Budgeted)
November Rs. 40,000 (Budgeted)
December Rs. 50,000 (Budgeted)
(4) Wages and Other Expenses - Actual and Budgeted
Wages Expenses
August (Actual) Rs. 15,000 Rs. 5,000
September (Actual) Rs. 15,000 Rs. 6,000
October (Budget) Rs. 18,000 Rs. 6,000
November (Budget) Rs. 18,000 Rs. 8,000
December (Budget) Rs. 20,000 Rs. 8,000
(5) Special:
Advance Income Tax Rs. 5,000 in November.
Plant - Rs. 10,000 in October.
(6) Rs. 300 Rent payable in advance.
(7) 10% Purchases and Sales are on cash term.
(8) Time lag:
Credit Sales - 2 months.
Credit Purchases - 1 month.
Wages - 1/2 month.
Expenses - 1/4 month
15. ST Enterprise manufactures a single product with capacity of 500 units p.m. at 100% capacity. Its cost structure is:
Material Cost Rs. 30 per unit
Wages Cost Rs. 20 per units
Variable Production Expenses Rs. 10 per units
Variable Sales Expenses Rs. 10 per units
Fixed Administrative Expenses Rs. 7,500 p.m.
Fixed Factory Expenses Rs. 10,000 p.m.
Sales Price Rs. 125
The expected Sales:
January to March 2006 300 units p.m.
April to June 2006 400 units p.m.
25% of Sales are for Cash
The particulars of credit allowed / enjoyed:
a. 60% of credit sales are realized in month following the month of sales and remaining in the subsequent month.
b. 25% of purchase price is payable against delivery and remaining in following month.
c. Wages are payable on 7th of following month.
d. All other expenses are payable in same month to which it pertains
e. Rs. 15,000 is payable as income tax on 15th June.
f. Rs. 10,000 is receivable as interest on 20th May.
g. Cash on Hand expected on 1st April 2006 is Rs. 15,000.
You are required to prepare the Cash Budget for period April to June 2006 and ascertain cash balance at end of each month.
16. From the following prepare Cash Budget 132006 to 3182006. Opening Cash Balance with Rs.40,000
Month Sales Selling
Expenses Purchases Wages Factory
Expenses Admin
Expenses
January 3,40,000 7,000 80,000 15,000 10,000 5,000
February 3,20,000 7,500 84,000 16,000 11,000 5,500
March 3,64,000 6,500 83,000 16,800 8,000 4,500
April 3,10,000 6,800 83,000 12,000 10,500 4,700
May 3,30,000 7,400 76,000 18,000 12,000 5,400
June 4,00,000 7,000 68,000 16,000 9,600 5,700
July 3,60,000 6,000 70,000 17,000 8,000 5.000
August 4,40,000 5,500 58,000 16,500 9,600 5,500
a. One month credit is allowed by the suppliers and to the customers.
b. Lag in Payment:
Wages 1/8 Month
Factory Expenses 1 Month,
Administration Expenses 1 Month,
Selling Expenses 1 Month.
c. Machinery purchased for Rs. 1,00,000 in March payable on delivery.
d. Building purchased in April Rs. 1,50,000 payable in equal installments in May and July.
e. Commission @ 3% on sales payable two months after sales.
17. M/s. Delta Enterprises produces a single product that sells for Rs. 75 per unit. The cost data is:
a. Variable manufacturing expenses are Rs. 35 per unit. .
b. Variable selling and administrative expenses are Rs. 5 per unit sold.
c. Fixed manufacturing costs requiring cash are Rs. 2,50,000 per month.
d. Fixed selling and administrative expenses are Rs. 2,00,000 per month, all requiring cash.
e. Depreciation is Rs. 60,000 per month.
f. Other relevant data is:
Finished stock is kept equal to sales requirements for the next two months budgeted sales. The opening finished stock (January, 1) is 42,000 units.
The firm does not hold raw materials inventory, and purchases raw material as needed.
The cost of raw materials is included in the variable manufacturing cost of Rs. 35.
The firm has a practice of making all sales on credit, collecting 30% in the month of sale and the balance in the following month. There are no bad debts and no overdue accounts. Opening Debts (on January, 1) balance is Rs. 7,00,000.
The firm pays all manufacturing costs in the month of production.
The firm pays four-fifths of selling and administrative expenses in the month of sale, and the balance one-fifth is paid in the following month. On 1st January, the firm owed Rs. 70,000 for December selling and distribution expenses (Rs. 30,000 variable and Rs. 40,000 fixed).
The minimum desired cash balance is Rs. 80,000, which is also the amount the firm has on 1st January. Borrowings can be made in multiples of 10,000 and can be repaid in multiples of Rs. 10,000. The company must borrow at the beginning of a month and repay at the end of a month if sufficient cash is not available. The interest rate is 10% p.a. and the firm pays interest when it repays loans or portions of them.
g. The sales budget for the first six months in units is:
January 20,000
February 26,000
March 30,000
April 32,000
May 30,000
June 28,000
You are required to prepare a Cash Budget for the months of January, February and March.