Exercises 3Ms

Exercise1 : cashflow budget Watson limited is preparing its budgets for the next quarter. The following information has been drawn from the budgets prepared in the planning exercise so far sales value June (estimate) $12,500 July (budget) $13,600 August $17,000 September $16,800 Direct wages $1300 per month Direct materials June (estimate) $3,450 July (budget) $3,780 August $2,890 September $3,150 Other information Watson sells 10 per cent of its goods for cash. The remainder of customers receive one month’s credit. Payments to creditors are made in the month following purchase. Wages are paid as they are incurred. Watson takes one month’s credit on all overheads. Production overheads are $3,200 per month. Selling, distribution and administration overheads amount to $1,890 per month. Included in the amounts form the overhead given above are depreciation charges of $300 and $190 respectively. Watson expects to purchase a delivery vehicle in august for cash payment of $9,870 The cash balance at the end of June is forecast to be $1,235 You are required to prepare a cashflow budget for each of the months July to September Solution Watson Ltd cashflow budget for July to September July $ August $ September $ Sales receipts: 10% in cash 90% in one month Total receipts Payments

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Cash flow Budgets exercise

Transcript of Exercises 3Ms

Exercise1: cashflow budget

Watson limited is preparing its budgets for the next quarter. The following information has been drawn from the budgets prepared in the planning exercise so farsales value June (estimate) $12,500

July (budget) $13,600 August $17,000 September $16,800

Direct wages $1300 per month

Direct materials June (estimate) $3,450 July (budget) $3,780 August $2,890 September $3,150

Other information Watson sells 10 per cent of its goods for cash. The remainder of customers receive

one month’s credit. Payments to creditors are made in the month following purchase. Wages are paid as they are incurred. Watson takes one month’s credit on all overheads. Production overheads are $3,200 per month. Selling, distribution and administration overheads amount to $1,890 per month. Included in the amounts form the overhead given above are depreciation charges

of $300 and $190 respectively. Watson expects to purchase a delivery vehicle in august for cash payment of

$9,870 The cash balance at the end of June is forecast to be $1,235

You are required to prepare a cashflow budget for each of the months July to September

SolutionWatson Ltd cashflow budget for July to September

July $

August $

September $

Sales receipts:

10% in cash

90% in one month

Total receipts Payments

Material purchases (one month credit)

direct wages

Production overheads

Selling, distribution and administration overhead

Delivery vehicle

Total payments Net cash inflow/outflow

Opening cash balance Closing cash balance at the end of the month

Exercise 2

Stores Record CardIn the context of a company’s stock control, the following data relates to item

number 7829Units

Stock levels: maximum 6,000 minimum 1,000Re-order level- when free balance reaches 1,600Reorder quantity 2,000Opening balances at 1 August included:Stock in the Stores 1,600Ordered from suppliers awaiting delivery 2,200Allocated 1,200

Transactions for three months ended 31 October included:August September October

Received 1,200 2,400 3,600Issued 1,400 3,600 2,200Allocated 1,800 4,600 1,400Returns to supplier(not replaced) 200 800 400Transfer( Transfer note) from Department X to Department Y

600 _ 800

Returns to stores 600 400 200

Maximum 6000 Reorder level:free balance CodeMinimum 1000 Date 01 July 2000 Description 7829Reorder level 2000 Quantity 1600 Unit each

Location

DateDuring Month Issued Balance

Order Number

During month Rec'd Balance Ref Rec'd Issued Balance

Free balance

Aug

Sept

Oct

STORES RECORD CARD