a) | SCHEDULE OF EXCEPTED RECEIPT | |||||||||||
Cash Receipt in June from Sales of May | $160,000 | (400000*40%) | ||||||||||
June | July | |||||||||||
A | Estimated Sales | $700,000 | $900,000 | |||||||||
B=A*60% | Receipt from the current month's sale | $420,000 | $540,000 | |||||||||
C | Receipt from previous month's sale | $160,000 | $280,000 | |||||||||
D=B+C | Expected Receipts from debtors | $580,000 | $820,000 | |||||||||
b) | VARIOUS TYPES OF BUDGETS | |||||||||||
Sales Budget | Estimates Sales in units and dollar for each product and for each month | |||||||||||
Production budget | Estimates Production requirement for each product and for each month considering finished goods inventory | |||||||||||
Raw materials Purchase Budget | Estimates Raw materials purchase in each month considering raw material inventory | |||||||||||
Operations costs budgets | Estimates other operations costs each month | |||||||||||
Cash budget | Estimates cash receipt,cash payments and financing need in each month | |||||||||||
c) | Sales Budget will estimate monthly sales | |||||||||||
It affects the production budget , because production quantity is related to quantity of sales | ||||||||||||
It Affects Cash receipt budget because receipt of cash depends on sales | ||||||||||||
It affects Sales expenses budget because variable sales expenses like commissions etc depends on sales | ||||||||||||
d) | Integrated budget starts with Sales budget | |||||||||||
Cash recept budget is derived fromsales budget | ||||||||||||
Production budget is derived from sales budget | ||||||||||||
Sales expenses budget is derived from Sales budget | ||||||||||||
Raw materials purchase derived from production budget | ||||||||||||
Manufacturing overhead budget derived from production budget | ||||||||||||
e. | Net Present value indicates Wealth generated for the shareholders | |||||||||||
Unlike payback method , it considers time value of money | ||||||||||||
Internal Rate of return may give more than one rate.NPV gives only one value | ||||||||||||
Disadvantage: | ||||||||||||
Deciding on the discount rate and risk is difficult | ||||||||||||
In case of mutually exclusive projects, the project selected may change with change in discount rate | ||||||||||||
QUESTION THREE Easy Spread Ltd is a food processing company whose main product is margarine. The CEO, Grant, is contemp...
QUESTION THREE Easy Spread Ltd is a food processing company whose main product is margarine. The CEO, Grant, is contemplating expanding the business by selling its margarine products into the growing Indonesian market. He asks you, as the company’s accountant, whether financial planning structures and processes within the company are set up to deal with this expansion of operations and greater financial complexity associated with export trading. You know that the company has developed very detailed processes for preparing its...
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