Question

Wages Question 2 You are presented with the following forecasted cash flow data for your organization for the period May to December 2019. May June July Aug Sep Oct Nov Dee. GH GH GH GH GHE GH GH GH€ Sales 80,000 100,000 110,000 130,000 140,000 150,000 160,000 180,000 Purchases 40,000 60,000 80,000 90,000 110,000 130,000 140,000 150,000 10,000 12,000 6,000 20,000 24,000 28,000 32,000 36,000 Overheads 10,000 10,000 15.000 15.000 15.000 20,000 20,000 20,000 Dividends 20,000 40.000 Capital expenditure 30.000 You are also told the following: i Sales are 40% cash 60% credit. Credit sales are paid two months after the month of sale. ii. Purchases are paid the month following purchase. iii. 75% of wages are paid the month after they are declared. iv. Overhead are paid the month after they are incurred. Dividends are paid three months after they are declared. vi. Capital expenditure is paid two months after it is incurred. vii. The opening cash balance is GH¢ 15,000. The managing director is pleased with the above figures as they show sales will have increased by more than 100% in the period under review. In order to achieve this he has arranged a bank overdraft with a ceiling of GH50,000 to accommodate the increased inventory levels and wage bill for overtime worked. Required a) Prepare a cash budget for the six-month period July to December 2019. [14 marks) b) Comment on your results in the light of the managing director's comments and offer advice. [6 marks)

please kindly provide some explanation to your solution for easy understanding. thank you

Answer 1

CASH BUDGET Particulas. July August Sept October Nov Dec Total RECENTS: Cash Sales 441000 52.000 56,000 Collection from Debtor 48000 Goooo 66.000 78.000 84000 90000 Bankoverdraft 50000 - - Total 12000 12000 122000 138000 148000 PAY MENTS : Perchases 60000 80000 90000 110000 130,000 140000 wages 10500 9500 over Hlads 10000 15000 15000 15000 20000 20000 Dividends - - 20000 - - . - 162000 21000 23000 331000 29000 -1000 Capital 30000 irure - 'Expenditue - Total 80500 104500 146000 178000 179000 193,000 Net cash flow 61500 7500 (24000) 40000) (310002 ( 31,000) Balance at the 15000 76500 guovo . 60000 20000 (11.000) Loginning of month Balance at the 76500 gyoou Goodo 20000 (11000) (42,000) ond of the month -

WORKINGS: @ Sales Receipts :- 1 July 240% 110,000 $ Cash Sales ales 44000 creditSales Bottes collection % 0 % 48000 August Sept det 30,088x40% 140, 159,00 52000 560" =60,000 100 pm 110 0s. Bore = 60,000 -66000 78000 Nov 16000000 -64000 Me On Dec. 180.00 ! - 2000 150, %. = 84000 390,000 148000 13800 Total collection 92000 162000 122000 112000 ® Purchases : July Aug Sept Betobey 90000 110086 130000 140,000 80000 @ wages: July Aug Gupt Aug Sept October Now Dec. month 4500 15000 18000 28000 24000 757004 Previous 9000 month Total 10,500 9500 21000 23000 29000 53000 — The Prcrease in the forventory level and the wages and overlteads have resulted in a Ngative cash "Balomce at the end the end o the month of December. Hence the momaza is sequested to seduce the overhead and wage cost