The following information for the six months ended 31 December 2009 relates to the business of Mr N Morris:
a) Opening cash (including bank) balance Rs 1,200
b) Production in units:
2009 2010
Apr May June July Aug Sept Oct Nov Dec Jan Feb
240 270 300 320 350 370 380 340 310 260 250
c) Raw materials used in production cost Rs 5 per unit. Of this 80 percent is paid in the month of production and 20 percent in the month after production.
d) Direct labour cost of Rs 8 per unit are payable in the month of production.
e) Variable expenses are Rs 2 per unit, payable one half in the same month as production and one half in the month following production.
f) Sales at Rs 20 per unit:
2009
Mar Apr May June July Aug Sept Oct Nov Dec
260 200 320 290 400 300 350 400 390 400
Debtors pay their accounts three months after that in which sales are made.
g) Fixed expenses of Rs 400 per month payable each month
h) Machinery costing Rs 2000 to be paid in October 2009.
i) Will receive a legacy of Rs 2500 in December 2009.
j) Drawings to be Rs 300 per month.
Required:
(a) Prepare a cash budget for each of the six months to 31 December 2009, showing the cash balance at the end of each month.
(b) Describe the objectives of budgetary planning and control systems.
(c) Briefly describe the importance of preparing a cash budget.