Question 5 A new business, Green Heaters Inc., is looking to commence the production and...
90.2K
Verified Solution
Link Copied!
Question
Accounting
Question 5 A new business, Green Heaters Inc., is looking to commence the production and sale of low energy portable heaters and requires the preparation of a cash budget. The following information has been provided. a. Selling price per unit N160,000; Cost per unit: Direct materials N50,000; Direct wages N30,000. b. Monthly fixed costs: Admin. N800,000; Rent \& Rates N2,000,000; Depreciation N1,000,000. c. Planned activity level is 200 units per month. d. All sales will be on one month credit. e. Materials are purchased on two months credit. Monthly materials are supplied for the projected planned activity level of 200 units. f. Wages and Admin overheads are paid in the month they are incurred. g. Rent \& Rates are paid quarterly ( 3 months) in advance staring on July 1. h. Machinery will be purchased for N24,000,000, with 10% paid in July and the balance paid in subsequent monthly instalments of N1,000,000. i. Initial capital of N20,000,000 cash is brought in July. Required: Prepare the cash budget for the period July to December for Green Heaters Inc. What should the business do in months where the closing cash balance is negative? [25 marks]
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
