A newly formed manufacturing company will commence its operations in January. The following estimates have been prepared for the next four months: -

Jan Feb Mar Apr
Unit produced 40 40 60 60
Units sold 5 30 45 75

There will be stock of raw materials valued at $20,000 at 31st January and it will be maintained at this level after there.

Data per unit:
$
Selling price 1,500
Costs:
Materials 700
Labour 400
Variable overheads 100

Fixed overhead will be $11,500 per month.

Plant and machinery costing $100,000 will be paid for as follows:

Feb $50,000
April $25,000
Jun $25,000

Depreciation on plant and machinery is to be charged at $1,500 per month (and is included in fixed overheads).

Credit Terms:
(I) Sales 50% cash, the balance payable 2-months later.
(ii) Labour-cash basis
(iii) All other expenditure – 2 months credit.

Required:
(a) Prepare a cash budget for the four months to 30th April showing clearly the balance at the end of each month.
(b) How many units of finished products will be in stock at 30th April?
Briefly comment on how the use of “spreadsheets” might help management for cash budgeting.

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Cash in-flow
Sales
January = $3,750
Feb = $22,500
Mar = $3,750
Apr = $22,500