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Question One The following budgeted statement of profit or loss has been prepared for Kanda Ltd for the four months January to April 2020: January February March April Ghe Ghe Ghe Ghe Sales 70,000 85,000 60,000 63.000 Cost of sales 45,000 57,500 52,500 45.000 Gross profit 25,000 27,500 17,500 18,000 Administration and selling overhead (10,000) (17.500) (10,500) (12.000) Net profit before interest 15,000 10,000 7.000 6,000 a. 50% of the cost of sales relates to material purchases for the month. Materials are paid for one month after purchase. Material cost payable as at 1" January 2020 is GH30,000 b. 30% of the cost of sales relates to direct labour which is paid for when incurred. c. The remainder of the cost of sales is production overhead (Fixed and Variable). d. Ghe6,000 per month is a fixed overhead cost which includes Gh2,000 depreciation. Fixed production overhead costs are paid for when incurred. e. The remaining overhead is variable. The variable production overhead is paid 60% in the month of usage and the balance one month later. Unpaid variable production overhead at the beginning of January is Gh5,000. f. The administration and selling costs are paid quarterly in advance on 1 January, 1 April, 1 July and 1 October. The amount payable is Gh15,000 per quarter. g. All sales are on credit. 40% of receivables are expected to be paid in the month of sale and 60% in the following month. Unpaid trade receivables at the beginning of January were Gh35,000. h. The company intends to purchase capital equipment costing Ghe25,000 in February which will be paid for immediately. i. The bank balance on 1 January 2020 is expected to be Gh25,000. Required: Prepare a cash Budget for January to March 2020

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