Accounting
Individual Assignment 30% (40 marks)
Question
Spears Limited is engaged in manufacturing of special component (KWQ 12) be used in for calculators. As a step towards reducing uncertainty over the finance needs of the new business, the finance manager has asked you to prepare a cash budget for Spears Ltd for the nine (9) months period from 1 January 2014 till 30
September 2014.
You have collected some raw data from the concerned department heads and tabulated them as follows:
a) The following are sales for the nine month period are as follows:
Sales Forecast
Month
Estimated Sales Units
January
250,000February255,000March264,000April290,000May315,000June340,000July365,000August270,000September
257,000October310,000
The estimated selling price per special component is $5.00. The collections for the above sales forecast are as follows:
i. Collection from customers within the month of sale = 10% ( deemed to be cash sales)
ii. Collection from customers following the month of sale = 50%
iii. Collection from customers following the second month of sales = 30%
iv. 10% of the sales are estimated to become irrecoverable.
b) Direct materials are acquired one month prior to production and are paid the following month of purchase. One special component (KWQ 12) uses 2 units of direct materials. The company keeps stock of 25% of the next months estimated sales.
Balance of direct materials as at 31 December 2013 amounts to 140,000 units of direct material at $0.25 per unit. There is no change in the cost direct material.c) The Direct Labour cost is paid in the month when such costs are incurred.
The number of hours estimated are as follows:
JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptember120,000125,000130,000128,000142,000154,000165,000178,000190,000The company pays $1.50 per direct labour hour.
d) Operating Expenses are estimated to be $332,000 per month and this is paid end
Question
Spears Limited is engaged in manufacturing of special component (KWQ 12) be used in for calculators. As a step towards reducing uncertainty over the finance needs of the new business, the finance manager has asked you to prepare a cash budget for Spears Ltd for the nine (9) months period from 1 January 2014 till 30
September 2014.
You have collected some raw data from the concerned department heads and tabulated them as follows:
a) The following are sales for the nine month period are as follows:
Sales Forecast
Month
Estimated Sales Units
January
250,000February255,000March264,000April290,000May315,000June340,000July365,000August270,000September
257,000October310,000
The estimated selling price per special component is $5.00. The collections for the above sales forecast are as follows:
i. Collection from customers within the month of sale = 10% ( deemed to be cash sales)
ii. Collection from customers following the month of sale = 50%
iii. Collection from customers following the second month of sales = 30%
iv. 10% of the sales are estimated to become irrecoverable.
b) Direct materials are acquired one month prior to production and are paid the following month of purchase. One special component (KWQ 12) uses 2 units of direct materials. The company keeps stock of 25% of the next months estimated sales.
Balance of direct materials as at 31 December 2013 amounts to 140,000 units of direct material at $0.25 per unit. There is no change in the cost direct material.c) The Direct Labour cost is paid in the month when such costs are incurred.
The number of hours estimated are as follows:
JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptember120,000125,000130,000128,000142,000154,000165,000178,000190,000The company pays $1.50 per direct labour hour.
d) Operating Expenses are estimated to be $332,000 per month and this is paid end