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Watson Ltd is preparing its budgets for the next quarter The following information has been drawn from the budgets prepared in the planning exercise so far

Watson Ltd is preparing its budgets for the next quarter. The following information has been drawn from the budgets prepared in the planning exercise so far:

Sales value

June (estimate)

£12,500

 

July (budget)

£13,600

 

August

£17,000

 

September

£16,800

Direct wages

£1,300 per month

 

Direct material purchases

June (estimate)

£3,450

 

July (budget)

£3,780

 

August

£2,890

 

September

£3,150

Other information

? Watson sells 10 per cent of its goods for cash. The remainder of customers receive one month’s credit.

? Payments to material suppliers are made in the month following purchase.

? Wages are paid as they are incurred.

? Watson takes one month’s credit on all overheads.

Production overheads are £3,200 per month.

? Selling, distribution and administration overheads amount to £1,890 per month.

? Included in the amounts for overhead given above are depreciation charges of £300 and £190, respectively.

? Watson expects to purchase a delivery vehicle in August for a cash payment of £9,870.

? The cash balance at the end of June is forecast to be £1,235.

You are required to prepare a cash budget for each of the months July to September.

Jun 19 2020 View more View Less

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