Question

DeLux Brothers (Pty) Ltd intends to expand its Palapye based operations by acquiring a new plant. The Finance Manger has been asked by the owners of the company to prepare cash flow forecasts for the business for the period December 2017 to May 2018. The marketing department has prepared the following forecasts Month Sales BWP October 2017 – Actual 180 000 November 180 000 December 360 000 January 2018 450 000 February 500 000 March 360 000 April 360 000 May 280 000 Collection estimates from the credit department are as follows: O Collections within the month of sale (cash sales) – 10% O Collection in the month following the sale – 75% O Collection in the second month following the sale – 15% Total labour and raw materials costs are estimated for each month as follows: Month BWP December 2017 216 000 January 2018 270 000 February 300 000 March 250 000 April 216 000 May 168 000 General and administrative expenses will amount to approximately P27 000 per month, lease payments will amount to P9 000 per month; depreciation will be P34 000 per month; miscellaneous payments will be 2 700 per month; income tax payment of P300 000 will be due in March 2018 and a deposit of P180 000 on a new vehicle will be required in December 2017. The bank charges interest on overdraft of 7% (assume the interest is charged on closing balance for the previous month). The cash balance at the end of November will be P40 000. Required: a) Prepare a cash budget for the period December 2017 to May 2018 (21 marks)?

Answer 1

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Cash Budget
		December	Jan	Feb	Mar	Apr	May
Beginning Cash Balance		$        40,000	$                 -	$                (0)	$                (0)	$                (0)	$                   0
Collection from customers	Working-1	$      198,000	$      342,000	$      441,500	$      478,500	$      381,000	$      352,000
Total cash Balance		$      238,000	$      342,000	$      441,500	$      478,500	$      381,000	$      352,000
Payment for:
Labor and raw material		$      216,000	$      270,000	$      300,000	$      250,000	$      216,000	$      168,000
General and Admin expense		$        27,000	$        27,000	$        27,000	$        27,000	$        27,000	$        27,000
Lease payment		$          9,000	$          9,000	$          9,000	$          9,000	$          9,000	$          9,000
Miscellaneous Payment		$          2,700	$          2,700	$          2,700	$          2,700	$          2,700	$          2,700
Income Tax payment					$      300,000
New vehicle deposit		$      180,000
Total Cash Payment		$      434,700	$      308,700	$      338,700	$      588,700	$      254,700	$      206,700
Surplus/(Deficit)		$   (196,700)	$        33,300	$      102,800	$   (110,200)	$      126,300	$      145,300
Borrowing		$      196,700			$      110,566
Repayment			$      (32,153)	$   (101,840)		$   (125,289)	$      (47,984)
Interest Payment			$        (1,147)	$            (960)	$            (366)	$        (1,011)	$            (280)
Ending Balance		$                 -	$                (0)	$                (0)	$                (0)	$                   0	$        97,036
1. Schedule of cash receipt from customers:
		October	November	December	Jan	Feb	Mar	Apr	May
Sales		$      180,000	$      180,000	$      360,000	$      450,000	$      500,000	$      360,000	$   360,000	$   280,000
Cash Sale	10%	$        18,000	$        18,000	$        36,000	$        45,000	$        50,000	$        36,000	$      36,000	$      28,000
Next Month Collection	75%		$      135,000	$      135,000	$      270,000	$      337,500	$      375,000	$   270,000	$   270,000
Next to Next month collection	15%			$        27,000	$        27,000	$        54,000	$        67,500	$      75,000	$      54,000
Collection from customers				$      198,000	$      342,000	$      441,500	$      478,500	$   381,000	$   352,000