QUESTION 1 You are required to prepare a cash budget for the third quarter of 2020 for STS Corporation. Month Total sales (RM) March 170,000 April 100,000 May 140,000 June 180,000 July 200,000 August September October 220,000 195,000 180,000 i) The company makes 10 percent cash sales, and the balance are collected as follows; 60 percent is collected one month after sales, 30 percent is collected two months after sales, and 10 percent is collected three months after sales. ii) Purchase of raw materials is 50 percent of sales and are made one month prior to sales. Payment are made equally in the two months after the purchases. iii) Wages and salaries amounting to 10 percent of the last month’s sales. The company fixed monthly expenses are RM3,000 for rent, RM2,000 for utilities, RM10,000 for depreciation, and RM1,500 for insurance. iv) A quarterly dividend of RM50,000 will be paid at the end of each quarter. v) The company plans to pay RM70,500 in cash for a new machinery installed in August. vi) Ending cash balance for June 30th, 2020 is RM15,000 and the firm wishes to maintain a minimum balance of RM40,000 per month.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter4: Financial Planning And Forecasting
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QUESTION 1
You are required to prepare a cash budget for the third quarter of 2020 for STS Corporation.
Month Total sales
(RM)
March 170,000
April 100,000
May 140,000
June 180,000
July 200,000
August
September
October
220,000
195,000
180,000
i) The company makes 10 percent cash sales, and the balance are collected as follows; 60
percent is collected one month after sales, 30 percent is collected two months after sales,
and 10 percent is collected three months after sales.
ii) Purchase of raw materials is 50 percent of sales and are made one month prior to sales.
Payment are made equally in the two months after the purchases.
iii) Wages and salaries amounting to 10 percent of the last month’s sales. The company fixed
monthly expenses are RM3,000 for rent, RM2,000 for utilities, RM10,000 for depreciation,
and RM1,500 for insurance.
iv) A quarterly dividend of RM50,000 will be paid at the end of each quarter.
v) The company plans to pay RM70,500 in cash for a new machinery installed in August.
vi) Ending cash balance for June 30th, 2020 is RM15,000 and the firm wishes to maintain a
minimum balance of RM40,000 per month.

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