Question

Jingga Big Supplies’ projected sales for the next six months of 2020 are given below.

July                             RM500,000     October           RM800,000

August                         RM600,000     November       RM900,000

September                  RM800,000     December       RM800,000

40% of sales is collected in the month of the sale, 50% is collected in the month following the sale, and 10% is written off as uncollectible.

Cost of goods sold is 70% of sales. Purchases are made on the month prior to the sale, and are paid during the month the purchases are made (i.e. goods sold in August are bought and paid for in July). Total other cash expenses are RM50,000/month.

The company's cash balance as of 30 September 2020 will be RM40,000. Excess cash will be used to retire short-term borrowing (if any). Jingga Big has no short-term borrowing as of 30 September, 2020. Assume that the interest rate on short-term borrowing is 1% per month. The company must have a minimum cash balance of RM20,000 at the beginning of each month. Round all answers to the nearest RM100.

Required:

Prepare Jingga Big’s cash budget for the fourth quarter of 2020..

Answer 1

Cost of sales

• oct = 560,000 (800,000*70%)
• nov= 630,000 (900,000*70%)
• dec= 560,000 (800,000*70%)

notes

1. Sales of January is not given ,so the payment of dec is considered as nil.