Question :
The subsequent data pertain to a shop. The owner has made following sales forecasts for the first 5 months of the coming year.
£.
January 40,000
February 45,000
March 55,000
April 60,000
May 50,000
Other data are as follows:
(a) Debtors and creditors' balances at the beginning of the year are £ 30,000 and £14,000 respectively. The balances of other relevant assets and liabilities are:
£.
Cash balance 7,500
Stock 51,000
Accrued sales commission 3,500
(b) 40% sales are on cash basis. Credit sales are collected in the following month of sale.
(c) Cost of sales is 60% of sales.
(d) The only other variable cost is a 5% commission to sales agents. Sales commission is paid in the month after it is earned, i.e.,time-lag is one month.
(e) Inventory is kept equal to sales needs for the next two months' budgeted sales.
(f) Trade creditors are paid in the subsequent month after purchases.
(g) Fixed costs are £ 5,000 per month, including £ 2,000 depreciation.
Required:
Prepare a cash budget for each of the first three months of the coming year.