The following information relates to Anu Limited, a AI enabled toy manufacturing company: The selling price of a toy is 3,000, and sales are made on…

CA Intermediate · Cost and Management Accounting · MTP · January 2025
The following information relates to Anu Limited, a AI enabled toy manufacturing company: The selling price of a toy is 3,000, and sales are made on credit and invoiced on the last day of the month. Variable costs of production per toy are materials (1, 000), labour (800), and overhead (400) The sales manager has forecasted the following volumes: Month No. of Toys November 1,000 December 1,000 January 1,000 February 1,250 March 1,500 April 2,000 May 1,900 June 2,200 July 2,200 August 2,300 Customers are expected to pay 50% One month after the sale and 50% Two months after the sale. The company produces the toys two months before they are sold and the creditors for materials are paid two months after production. Variable overheads are paid in the month following production and are expected to increase by 25 % in April; 75% of wages are paid in the month of production and 25% in the following month. A wage increase of 25% will take place on 1st March. The company needs funds for the running the business and purchase of new machine so it will sell one of its freehold properties in June for 20,00,000, and buy a new machine in June for 5,00,000. Depreciation is currently - 10,000 per month, and will rise to 15,000 after the purchase of the new machine. The company's corporation tax of 1,00,000 is due for payment in March. The company presently has a cash balance at bank on 31 December 2023, of 50,000. You are required to PREPARE a cash budget for the six months from January to June, 2024.

Suggested Answer and Working Notes:

Workings: 1. Sale receipts Month Nov Dec Jan Feb Mar Apr May Jun Forecast sales (S) 1,000 1,000 1,000 1,250 1,500 2,000 1,900 2,200 S×3000 30,00,000 30,00,000 30,00,000 37,50,000 45,00,000 60,00,000 57,00,000 66,00,000 Debtors pay: 1 month 50% 15,00,000 15,00,000 15,00,000 18,75,000 22,50,000 30,00,000 28,50,000 2 nd month 50% 15,00,000 15,00,000 15,00,000 18,75,000 22,50,000 30,00,000 Total 15,00,000 30,00,000 30,00,000 33,75,000 41,25,000 52,50,000 58,50,000 2. Variable overheads Month Nov Dec Jan Feb Mar Apr May Jun Qty produced (Q) 1,000 1,250 1,500 2,000 1,900 2,200 2,200 2,300 Var. overhead (Q×400) 4,00,000 5,00,000 6,00,000 8,00,000 7,60,000 11,00,000 11,00,000 11,50,000 Paid one month later 4,00,000 5,00,000 6,00,000 8,00,000 7,60,000 11,00,000 11,00,000 3. Wages payments Month Dec Jan Feb Mar Apr May Jun Qty produced (Q) 1,250 1,500 2,000 1,900 2,200 2,200 2,300 Wages (Q×800) 10,00,000 12,00,000 16,00,000 Wages (Q x 1,000) 19,00,000 22,00,000 22,00,000 23,00,000 75% this month 7,50,000 9,00,000 12,00,000 14,25,000 16,50,000 16,50,000 17,25,000 25% next month 2,50,000 3,00,000 4,00,000 4,75,000 5,50,000 5,50,000 Total 7,50,000 11,50,000 15,00,000 18,25,000 21,25,000 22,00,000 22,75,000 CASH BUDGET – SIX MONTHS ENDED JUNE Jan ₹ Feb ₹ Mar ₹ Apr ₹ May ₹ Jun ₹ Receipts: Sales receipts 30,00,000 30,00,000 33,75,000 41,25,000 52,50,000 58,50,000 Freehold property - - - - - 20,00,000 Total Receipts 30,00,000 30,00,000 33,75,000 41,25,000 52,50,000 78,50,000 Payments: Materials 10,00,000 12,50,000 15,00,000 20,00,000 19,00,000 22,00,000 Var. overheads 5,00,000 6,00,000 8,00,000 7,60,000 11,00,000 11,00,000 Wages 11,50,000 15,00,000 18,25,000 21,25,000 22,00,000 22,75,000 Machine - - - - - 5,00,000 Tax - - 1,00,000 - - - Total Payments 26,50,000 33,50,000 42,25,000 48,85,000 52,00,000 60,75,000 Net cash flow 3,50,000 (3,50,000) (8,50,000) (7,60,000) 50,000 17,75,000 Balance b/f 50,000 4,00,000 50,000 (8,00,000) (15,60,000) (15,10,000) Cumulative cash flow 4,00,000 50,000 (8,00,000) (15,60,000) (15,10,000) 2,65,000

Topics: Budgets and Budgetary Control

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