Q) From the following budget figures ,prepare a cash budget of three months to June30,

2005

Months Sales Material Wages Overheads

January 60,000 40,000 11,000 6,200
February 56,000 48,000 11,600 6,600
March 64000 50000 12000 6800
April 80000 56000 12400 7200
May 84000 62000 13000 8600
June 76000 50000 14000 8000
st
Expected cash balance on 1 April, 2005 was Rs 10,000

a) Materials and overheads are to be paid during the month following the month of
supply.
b) Wages are to be paid during the month in which they are incurred
c) The term of credit sales are payment by end of the months following the month of
sale.1/2 of the sales are paid in the next month, the other half to be paid in the
following month.
d) 5% Sales Commission is to be paid within the month following actual sales
e) Plant and machinery Rs 10,000 is to be installed in the month of January and
payment is to be made in month of May.
f) Equity share call money for Rs 20,000 is due on 1st May

Solution

Details April May June

Balance of cash 10000 -2400 -600
Receipts
Cash from debtors:
Feb sales 28,000
March sales 32000 32000
April Sales 40000 40000
May sales 42000
Share Call Money 20000
Total cash Available 70000 89600 81400
Disbursements:
Material 50000 56000 62000
Overheads 6800 7200 8600
Wages 12400 13000 14000
Sales commissions 3200 4000 4200
Payment of plant and machinery 10000
Total Disbursements 72400 90200 88800
Balance of cash -2400 -600 -7400

Q2) Prepare a cash budget for the month of May ,June and July2009, on the basis of the
following information:

Credit Credit Manufacturing

Months Sales Purchases Wages Exp Office Selling

March 60,000 36,000 9,000 4,000 2,000 4,000

April 62,000 38,000 8,000 3,000 1,500 5,000

May 64,000 33,000 10,000 4,500 2,500 4,500

June 58,000 35,000 8,500 3,500 2,000 3,500

July 56,000 39,000 9,500 4,000 1,000 4,500

August 60,000 34,000 8,000 3,000 1,500 4,500

st
1) Cash Balance on 1 May 2009 is Rs 8,000
2) Plant costing Rs 16,000 is due for the delivery in July ,payable 10% on delivery and
balance after 3 months
3) Advance tax of Rs8,000 each payable in March and June
4) Period of credit allowed is (i) By supplier -2 months (ii) to customers -1 month
5) Lag in payment of Manufacturing Expenses -1/2 Month
6) Lag in payment of office and selling Expenses -1 Month

Solution

Details May June July

Balance of cash 8,000 13,750 12,250

Receipts

Cash from debtors: 62,000 64,000 58,000

Total cash Available 62,000 64,000 58,000

Disbursements:

Creditors 36,000 38,000 33,000

Wages 10,000 8,500 9,500

Manu Exp 3,750 4,000 3,750

Office Exp 1,500 2,500 2,000

Selling Exp 5,000 4,500 3,500

Plant 1,600

Advance tax 8,000

Total Disbursements 56,250 65,500 53,350

Balance 13,750 12,250 16,900

Q3) ABC wishes to arrange overdraft facility with its bankers during the period April to
June when it will be manufacturing mostly for stock. Prepare a cash budget for the above
period from the following data.

Month Sales(Rs) Purchases (Rs ) Wages(Rs )

February 1,80,000 1,24,000 12,000
March 1,92,000 1,44,000 14,000
April 1,08,000 2,43,000 11,000
May 1,74,000 2,46,000 10,000
June 1,26,000 2,68,000 15,000
A) 50% of credit sales is realized in the month following the sale and the remaining
50% in the second month following .Creditors are paid in the month following the
month of purchase.
B) Cash at bank in 1st April Rs 25,000

Solution 3)

Particulars April May June

Cash Balance 25,000 56,000 (47,000)

Cash Receipts

Collection from Debtors 1,86,000 1,50,000 141,000

Disbursements
Payment to creditors 1,44,000 2,43,000 2,46,000
Wages
 11,000 10,000 15,000

Total Disbursement 155,000 253,000 261,000

Balance C/f 56,000 (47,000) (167,000)

Q4) The Expenses for the budget production of 10,000 units in a factory are furnished below:
Material- Rs 70/unit
Labour – Rs 25/unit
Variable overheads –Rs 20 /unit
Fixed Overheads ( Rs 1,00,000) –Rs 10/unit
Variable Expenses(Direct)-Rs 5/unit
Selling expenses ( 10% Fixed) –Rs 13/unit
Distribution expenses (20 % Fixed)-Rs 7/unit
Administration Expenses (Rs 50,000)-Rs 5/unit
Total cost per unit ( to make ,to sell )- Rs 155/unit
Prepare a budget for production of
8000 units b) 6,000 units ( indicate cost per unit at both the levels)
Assume that administration expenses are fixed for all the levels of production

Sol) 4

10,000 10,000 8,000 6,000 6,000

Units Units units 8,000 units units units
Per
Name of Expenses Per unit Amount Per unit Amount unit Amount
Production
Expenses

Material 70 700,000 70 560,000 70 420,000

Labour 25 250,000 25 200,000 25 150,000

Overheads 20 200,000 20 160,000 20 120,000

Direct (Var Exp ) 5 50,000 5 40,000 5 30,000

Fixed Overheads 10 100,000 13 100,000 16.67 100,000

Selling Expenses

Fixed 1.3 13,000 1.625 13,000 2.167 13,002

Variable 11.7 117,000 11.7 93,600 11.7 70,200
Distribution
Expenses

Fixed 1.4 14,000 1.75 14,000 2.334 14,004

Variable 5.6 56,000 5.6 44,800 5.6 33,600

Admin Exp 5 50000 6.25 50000 8.33 50,000

Total Cost 155 1,550,000 159 1,275,400 167 1,000,806