Reference no: EM132780629
Question - The following budgeted statement of profit or loss has been prepared for West Company for the four months January to April 2020
|
|
January
|
February
|
March
|
April
|
|
Sales
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$60,000
|
$50,000
|
$70,000
|
$60,000
|
|
Cost of production
|
50,000
|
55,000
|
32,500
|
50,000
|
|
Increase/decrease in inventory
|
(5,000)
|
(17,500)
|
(20,000)
|
(5,000)
|
|
Cost of sales
|
45,000
|
37,500
|
52,500
|
45,000
|
|
Gross profit
|
15,000
|
12,500
|
17,500
|
15,000
|
|
Administration and selling
|
(8,000)
|
(7,500)
|
(8,500)
|
(8,000)
|
|
Net profit before interest
|
7,000
|
5,000
|
9,000
|
7,000
|
1. 40% of the production cost relates to direct materials. Materials are bought in the month prior to the month in which they are used. Purchase are paid for one month after purchase.
2. 30% of the production costs relates to direct labour which is paid for when it is used
3. The reminder of the production cost is production overhead.
4. $5,000 per month is a fixed cost which includes $3000 depreciation.
5. The remaining overhead is variable. The variable production overhead is paid 40% in the month of usage and the balance of 60% one month later. Unpaid variable production overhead at the beginning of January is $9,000.
6. The administration and selling costs are paid quarterly in advance on January1, April 1, July 1 and October 1. The amount payable is $15,000 per quarter.
7. All sales are on credit. 20% of receivables are expected to be paid in the month of sale and 80% in the following month. Unpaid trade receivables at the beginning of January were $44,000.
8. The company intends to purchase capital equipment costing $30,000 in February which will be payable in March.
9. The bank balance on January 1 year 2019 is expected to be $5,000 overdrawn.
Required -
1. Prepare statement of receivable collection schedule?
2. Prepare statement of payments schedule?
3. Prepare the statement of Cash budget for West company the first quarter 2019?