Question

The problem question is LFJ Manufacturing requested the company cost accountant to prepare a cash budget for the four months ending 30 April 2018.

The written question does not provide the budgeted purchase amounts so they must be calculated. I want to know how they were calculated?

You have this problem on the Chegg website. Can't you look it up?

Answer 1

LFJ MANUFACTURING SERVICES
CASH BUDGETING
PERIOD: JANUARY 2018 – APRIL 2018
PERIOD	January	February	March	April
Receipts:
Sales - (Current month sales x 50%)	32500	35000	36250	38125
(Previous month sales x 50%)	32000	32500	35000	36250
Bank Loan		60000
Total Receipts – (A)	64500	127500	71250	74375
Payments:
Purchases – ({Current month sales*[100 /125]}*50%) ({65000*[100 /125]}*50%)	26000	28000	29000	30500
({Next month sales*[100 /125]}*50%) ({70000*[100 /125]}*50%)	28000	29000	30500	32000
Direct wages	12000	12000	13200	13200
Rent	15000			15000
Debenture Interest (200000*8%*6/12)	8000
Other Dividends			12000
Total Payments – (B)	89000	69000	84700	90700
Net Receipts/(Payments)    (A)-(B)	(24500)	58500	(13450)	(16325)
Bank Balance at the start	12000	(12500)	46000	32550
Bank Balance at the end	(12500)	46000	32550	16225

*It can be seen that sales are mark-up by 25% on goods purchased and these purchases are made one month before sale. As we are provided with sales forecast we can use next month sales for current month purchases.

Payments to these purchases were made 50% in the month of purchase and remaining in next month.

Purchases for current month can be calculated as below

({Next month sales*[100 /125]}*50%).