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cost accounting

a question on cash budget

QUESTION 4 Alfonso Trading Limited provides the following budgeted data for 2014. The following information is also avalable: (d) The company uses the FIFO method of inventory valuation. (e) The directors aim to maintain inventory lovels at 25% of the following month's sales. They expect to achieve this on 31 December 2013 but know it will not be possible every month. The company can buy in a maximum of 5500 units in any one month. (f) All sales are on credit. 50% of customers pay in the month following sales and receive a cash discount of 4%. The remaining customers pay two months after sale. (g) Trade receivables on 1 January 2014 are expected to be: $24000 from November's sales $49000 from December's sales. 2 Trade payables on 1 January 2014 are expected to total $20000. The company pays for all its purchases in the month after purchase, receiving a discount of 5% for prompt payment. REQUIRED (a) Prepare for each of the four months January to April 2014: (i) Purchases budget. Show purchases for each month in both units and value. [8] (ii) Trade receivables budget. [14] (iii) Trade payables budget. [10] (c) Prepare an extract from the statement of financial position at 30 April 2014 showing current assets and current liabilities. Additional information retating to April 2014 is as follows: REQUIRED (d) Calculate for April 2014: (i) the sensitivity of performance to changes in the seling price [2] (ii) the selling price per unit at which profit would be zero [1] (ii) the sensitivity of performance to changes in variable cost. [2] [Total: 40] Alfonso Trading Limited provides the following budgeted data for 2014. The following information is also available: (d) The company uses the FIFO method of inventory valuation. (e) The directors aim to maintain inventory levels at 25% of the following month's sales. They expect to achieve this on 31 December 2013 but know it will not be possible every month. The company can buy in a maximum of 5500 units in any one month. (f) All sales are on credit. 50% of customers pay in the month following sales and receive a cash discount of 4%. The remaining customers pay two months after sale. (g) Trade receivables on 1 January 2014 are expected to be: $24000 from November's sales $49000 from December's sales. 2 Trade payables on 1 January 2014 are expected to total $20000. The compary pays for all its purchases in the month after purchase, receiving a discount of 5% for prompt payment. REQUIRED (a) Prepare for each of the four months January to April 2014: (i) Purchases budget. Show purchases for each month in both units and value. [8] (ii) Trade receivables budget. [14] (iii) Trade payables budget. [10] (c) Prepare an extract from the statement of financial position at 30 April 2014 showing current assets and current liabilities. [3] Additional information relating to April 2014 is as follows: REQUIRED (d) Calculate for April 2014: (i) the sensitivity of performance to changes in the selling price [2] (ii) the selling price per unit at which profit would be zero [1] (iii) the sensitivity of performance to changes in variable cost. 12] [Total: 40] QUESTION 4 Alfonso Trading Limited provides the following budgeted data for 2014. The following information is also avalable: (d) The company uses the FIFO method of inventory valuation. (e) The directors aim to maintain inventory lovels at 25% of the following month's sales. They expect to achieve this on 31 December 2013 but know it will not be possible every month. The company can buy in a maximum of 5500 units in any one month. (f) All sales are on credit. 50% of customers pay in the month following sales and receive a cash discount of 4%. The remaining customers pay two months after sale. (g) Trade receivables on 1 January 2014 are expected to be: $24000 from November's sales $49000 from December's sales. 2 Trade payables on 1 January 2014 are expected to total $20000. The company pays for all its purchases in the month after purchase, receiving a discount of 5% for prompt payment. REQUIRED (a) Prepare for each of the four months January to April 2014: (i) Purchases budget. Show purchases for each month in both units and value. [8] (ii) Trade receivables budget. [14] (iii) Trade payables budget. [10] (c) Prepare an extract from the statement of financial position at 30 April 2014 showing current assets and current liabilities. Additional information retating to April 2014 is as follows: REQUIRED (d) Calculate for April 2014: (i) the sensitivity of performance to changes in the seling price [2] (ii) the selling price per unit at which profit would be zero [1] (ii) the sensitivity of performance to changes in variable cost. [2] [Total: 40] Alfonso Trading Limited provides the following budgeted data for 2014. The following information is also available: (d) The company uses the FIFO method of inventory valuation. (e) The directors aim to maintain inventory levels at 25% of the following month's sales. They expect to achieve this on 31 December 2013 but know it will not be possible every month. The company can buy in a maximum of 5500 units in any one month. (f) All sales are on credit. 50% of customers pay in the month following sales and receive a cash discount of 4%. The remaining customers pay two months after sale. (g) Trade receivables on 1 January 2014 are expected to be: $24000 from November's sales $49000 from December's sales. 2 Trade payables on 1 January 2014 are expected to total $20000. The compary pays for all its purchases in the month after purchase, receiving a discount of 5% for prompt payment. REQUIRED (a) Prepare for each of the four months January to April 2014: (i) Purchases budget. Show purchases for each month in both units and value. [8] (ii) Trade receivables budget. [14] (iii) Trade payables budget. [10] (c) Prepare an extract from the statement of financial position at 30 April 2014 showing current assets and current liabilities. [3] Additional information relating to April 2014 is as follows: REQUIRED (d) Calculate for April 2014: (i) the sensitivity of performance to changes in the selling price [2] (ii) the selling price per unit at which profit would be zero [1] (iii) the sensitivity of performance to changes in variable cost. 12] [Total: 40]

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