Exercise1: cashflow budget

Watson limited is preparing its budgets for the next quarter. The following information has been drawn from the
budgets prepared in the planning exercise so far
sales value
June (estimate)
$12,500
July (budget)
$13,600
August
$17,000
September
$16,800
Direct wages

$1300 per month

Direct materials

June (estimate)
July (budget)
August
September

$3,450
$3,780
$2,890
$3,150

Other information

Watson sells 10 per cent of its goods for cash. The remainder of customers receive
one months credit.
Payments to creditors are made in the month following purchase.
Wages are paid as they are incurred.
Watson takes one months credit on all overheads.
Production overheads are $3,200 per month.
Selling, distribution and administration overheads amount to $1,890 per month.
Included in the amounts form the overhead given above are depreciation charges
of $300 and $190 respectively.
Watson expects to purchase a delivery vehicle in august for cash payment of
$9,870
The cash balance at the end of June is forecast to be $1,235
You are required to prepare a cashflow budget for each of the months July to September

Solution
Watson Ltd cashflow budget for July to
September
July
$
Sales receipts:
10% in cash
90% in one month
Total receipts
Payments
Material purchases (one month credit)
direct wages
Production overheads
Selling, distribution and administration overhead
Delivery vehicle
Total payments
Net cash inflow/outflow
Opening cash balance
Closing cash balance at the end of the month

August
$

September
$

Exercise 2