Budgeting Classwork Case 2

1. Prepare a Cash Budget for the Eskimo Enterprises for Six months of April, May, June,
July, Aug and Sept. The company has a policy of maintaining a minimum cash balance of
Rs. 25,000. The Company’s cash balance as on 31st March is Rs 40,000.
(20Mar
ks)

Actual Sales (Rs) Estimated Sales (Rs)

January 95,500 April 110,000
February 95,000 May 125,000
March 110,000 June 140,000
July 160,000
August 170,000
September 280,000
October 145,000

Consider the following additional information:

a) Cash sales are 60 percent of the total sales. Considering there are 10% bad debts, the
remaining sales are collected equally during the following two months.
b) Cost of goods manufactured is 75 percent of sales. The Company buys 60% of the
material required for the next month in the previous month and the balance during
the same month. 65 percent of the cost is paid in one month and the balance is paid
in two months of the cost incurrence.
c) Fixed operating expenses are Rs 11,500 per month. Variable operating expenses are
5 percent of sales each month.
d) Quarterly interest on 8%, Rs 800,000 debentures is paid in following month after
the end of the quarter.
e) There is a miscellaneous income on account of on sale of scrap amounting to Rs
10,000 in the month of June and Rs.20, 000 in July.
f) Rs 60,000 are expected to be invested in capital assets during May.
g) An advance tax of Rs 45,000 will be paid in August.
h) Any short fall is borrowed as cash credit at 13 percent per annum and repayable
whenever surpluses allow.