Hasya and Hanna have taken yp a franchise arrangement with Honeyfry. The followi

Question

Hasya and Hanna have taken yp a franchise arrangement with Honeyfry. The following are the forecast figure for the next six months Purchases Sales Wages & Salaries Overhead RM 000RM'000 RM 20 20 40 20 15 15 18 November 2010 December 2010 40 50 58 120 February 201 60 60 20 20 25 (1) A franchise payment is made of RM6.000 per month. (2) 50% of the sales are for cash and balance 50% is credit sales. (3) The credit sales are collected by 50% one month after credit sales and balances 50% two months later. () Purchases are paid one month after purchase. (5) Wages and overhead are paid for in the month incurred. (6) Overheads above does not include: Rent RM4,000 per month to be paid quarterly in advance, in December 2010, March 2011, June 2011 and September 2011 of the following year. (7) Capital expenditure payments will be: RM8,500 RM2,250 RM5,000 February 2011 March 2011 April 2011 (3) A cash balance of RM2,250 is forecast as at 1 January 2011 Required : Prepare a cash budget for January, February and March 2011.

Explanation / Answer

Cash Budget for January,February and March 2011 January February March Cash receipts - Sales collections 77750 79500 93250 Total Cash Receipts 77750 79500 93250 Cash Payments - Purchases 50000 30000 40000 - Wages and salaries 40000 20000 25000 - Overheads 18000 18000 20000 - Francise payment 6000 6000 6000 - Rent 4000 - Capital Expenditure 8500 2250 Total Cash Payments 114000 82500 97250 Cash Surplus / (deficit) -36250 -3000 -4000 Add : Beginning cash balance 2250 -34000 -37000 Ending Cash balance -34000 -37000 -41000 Schedule for sales collection January February March Sales 58000 75000 120000 Cash sales (50%) 29000 37500 60000 November credit sale collection 21250 December credit sale collection 27500 27500 January credit sale collection 14500 14500 February Credit sale collection 18750 Total Sales collection 77750 79500 93250

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