Cost & Management Accounting (Mgt402) Assignment 04

Spring Semester 2007

Question:

United Company seeks assistance in developing cash and other budget

information for May, June and July. On April 30, the company had cash of Rs.
5,500, Accounts Receivable of Rs. 437,000, Inventories of Rs. 309,400 and
Accounts payables of Rs. 133,055. The budget is to be based on the following
assumptions:

Purchases:

a. Fifty four percent of all Purchases of Material and a like percentage of

marketing, general and administrative expenses are paid in the month
Purchases, while the reminder paid in the following month.
b. Each month’s units of ending material inventory are equal to 130% of next
month’s production requirement.
c. The cost of each unit of inventory is Rs. 20.
d. Wages and salaries earned each month by employees total Rs. 38,000.
e. Marketing, General and Administrative expenses (of which Rs.2,000 is
depreciation) are equal to 15% of the current month’s sales.

Sales:

a. Each month’s Sales are billed on the last day of the month.
b. Customers are allowed a 3% discount if payment is made within 10 days
after the billing date. Receivables are recorded at Gross Selling Price.
c. 60% of the billings are collected within the discount period; 25% by the
end of the month; 9% by the end of second month and 6% prove
uncollectible.

Actual and projected materials (in units) needed foe production:

March…………. 11, 800 June………… 11,400

April …………. 12,100 July ………… 12,000
May …………… 11,900 August……….12,200

Actual and projected Sales (in Rs.) are as follows:

March ………….354,000 June ……….342,000

April …………... 363,000 July ………. 360,000
May ……………. 357,000 August ……366,000
Cost & Management Accounting (Mgt402) Assignment 04
Spring Semester 2007

Accrued payroll (in Rs.) at the end of each month is as follows:

March …………. 3,100 June ……… 3,400

April …………....2,900 July ………… 3,000
May ……………. 3,300 August...….. 2,800

REQUIRED:

1. Budgeted cash disbursement during June (Marks: 10)

2. Budgeted cash collection during May (Marks: 5)
3. Budgeted units of inventory to be purchased during July (Marks: 5)

(Total Marks: 20)