Question

Question 2 24 December 2018, the Itami Wholesale Co. Is attempting to project cash recite diabursements through 31 January 2019. On this latter date, mount of R100 000. This amount was borrowed in September to carry the company note will be a ble the seasonal peak in November and December Selected General Ledger balances on 1 December 2018 are as follows Debit Credit Cash R88 000 Inventory R65 200 Accounts payable R136 000 Sales terms call for a 30% discount if payment is made within the first 10 days of the month after sales, with the balance due by the end of the month after sale. Experience has shown that 50% of the billings will be collected within the discount period, 30% by the end of the month after purchase, and 14% in the following month. The remaining 6% will be uncollectable. There are no cash sales. The average selling price of the company's products is R100 per unit. Actual and projected sales are as follows: R280 000 October actual R320 000 November actual R330 000 December estimated R250 000 January estimated R240 000 February estimated R2 400 000 Total estimated for year ending 30 June 2019 All purchases are payable within 15 days. Approximately 60% of the purchases in a month are paid that month, and the rest the following month. The average unit purchase cost is R80. Target ending inventories are 500 units plus 10% of the month's unit sales. Total budgeted marketing, distribution, and customer-service costs for the year are R600 000 Of this amount, R120 000 are considered fixed (and include depreciation of R30 000). The remainder varies with sales. Both fixed and variable marketing, distribution and customer service costs are paid as incurred. Required: 2.1 Prepare a cash budget for December 2018 and January 2019. Supply supporting schedules for collections of receivable: payments for merchandise; and marketing distribution and customer-service costs.

Answer 1

Schedule of Cash Collection from Customers December 18| January'19 November -Sales Collection 44,800 December Discount availed Sales collection December Sales collection 115,500 99,000 46,200 December Discount availed Sales collection 87,500 January Sales collection 75,000 Total Collection 259,300 208,700 Merchandise Purchase Budget December 18 January'19 Cost of Goods Sold 264,000 200,000 Add:Ending Inventory 60,000 66,400 Total needed 330,400 260,000 Less Beginning Imventory 66,400 65,200 Purchases 265,200 193,600

December'18 January 19 Working Note Sales (A) 330,000 250,000 Selling Price Per Unit (B) 100 100 No.of Unit Sold C= A/B 3,300 2,500 Cost Per Unit (D) 80 80 Cost of Goods Sold C*D 200,000 264,000 Schedule of payment for merchandise Purchase December 18| January'19 136,000 Accounts Payable-Dec-1,2018 December Purchase Payment 159,120 106,080 January Purchase Payment Total Payment for Purchase 116,160 222,240 295,120 Total Budgeted Marketing and Distribution Cost for the Year 600,000 Less: Depreciation 30,000 Less Fixed Cost 120,000 Total Variable Cost for the Year 450,000

Total Estimated Sales for Year Ending 30 june 2019 Average Selling Price 2,400,000 100 Estimated No.of Units to be sold 24,000 Total Variable Cost for the Year 450,000 Estimated No.of Units to be sold 24,000 Marketing Variable Cost Per Unit 18.75 Total Marketing Fixed Cost 120,000 10,000 (120,000/12) Fixed Cost Per Month Marketing and distribution Cost Budget December 18| January'19 Marketing Variable Cost Per Unit (1) No of Units Sold (2) 18.75 18.75 3,300 2,500 Variable Marketing Cost 3=1*2 Fixed Marketing Cost (4) Total Payment for M &D 3+4 61,875 46,875 10,000 10,000 71,875 56,875

Cash Budget December 18 January'19 (19,695) Beginning Cash Balance 88,000 Add: Cash Collection From Accounts Receivables 259,300 208,700 Total Available Cash (i) 347,300 189,005 Less: Cash Disbursement Cash Payment to Merchandise purchse Cash payment to Marketing and distribution Expense 295,120 222,240 56,875 71,875 Total Cash Disbursement (ii) 366,995 (19,695) 279,115 (90,110) Ending Cash Balance

Computation Given Below

Schedule of Cash Collection from Customers December'18 =320000*14% -330000*50%*70% - 330000*30% January 19 November -Sales Collection December Discount availed Sales collection December Sales collection December - Discount availed Sales collection January Sales collection Total Collection -330000*14% -250000*50%*70% -250000 30% -SUM( D4: D8 ) -SUM (C4: C8) Merchandise Purchase Budget December' 18 -330000/100*80 =(500+3300*10%)*80 -SUM(C13:C14) January 19 |=250000/100*80 ( 500+2500*10%)*80 Cost of Goods Sold Add:Ending Inventory Total needed Less:Beginning Inventory Purchases -SUM (D13:D14) 65200 66400 -C15-C16 =D15-D16

Schedule of payment for merchandise Purchase December'18 January 19 Accounts Payable-Dec-1,2018 December Purchase Payment January Purchase Payment Total Payment for Purchase 136000 - 265200*60% - 265200*40% - 193600*60% |=SUM(D28:D30) SUM(C28: C30)