MR KAYBEE

QUESTION 1
Kaybee Enterprise is preparing a cash budget for the first quarter of the year. It has forecasted the
following sales (in $000).

October 5 000 February 6 000

November 7 000 March 3 000
December 9 000 April 4 000
January 8 000

Additional Information
i. Cash balance on 1st January is 4 500.
ii. The business predicted that it may be able to sell 50% on cash basis and balance 40% can
be collected in the following month after sales and 10% in the second month following
sales.
iii. Purchases will be 50% of sales and is made one month before the sales occur. The payment
is made equally in the month of purchase and one month after the purchase.
iv. Wages paid are 25% of the month’s sales and are paid in the month in which they are
occurred. Selling and administrative expenses are $200 000 plus 10% of the month’s sales.
v. Other fixed monthly expenses:
a) Lease payment for machinery amounting to $90 000.
b) Depreciation expense for the machinery is $50 000.
c) Instalment for loan made from Austin amounting to $80 000.
d) Insurance amounting to $40 000.

Required:
Prepare a cash budget for Kaybee Enterprise for the first quarter of the year. [20]

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 MR KAYBEE

QUESTION 2
The following information relates to Mr Kaybee Limited Company.

Months Credit Sales Credit Wages Manufacturing Office Selling

Purchases expenses expenses expenses
$ $ $ $ $ $
January 150 000 50 000 5 000 4 000 2 000 4 000
February 145 000 40 000 3 000 5 000 3 000 5 000
March 120 000 50 000 2 000 4 000 4 000 4 000
April 135 000 60 000 4 000 3 000 3 000 3 000
May 125 000 70 000 2 000 4 000 2 000 4 000
June 135 000 30 000 5 000 3 000 5 000 3 000

Other information is as follows:

i. Cash balance on 1st March 2019 is $250 000.
ii. Plant and equipment costing $50 000 is due for delivery in May, payable 10% on delivery
and the balance after 3 months.
iii. Advance tax of $10 000 each is payable in April and May.
iv. Period of credit allowed is as follows:
(a) by suppliers two months
(b) to customers one month.
v. Lag in payment of manufacturing expenses one month.
vi. The wages are paid within the month they are incurred.
vii. Lag in payment of office and selling expenses one month.

Required:
Prepare a cash budget for the months of March, April and May 2019. Please show all your
workings. [20]

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