Question #2 Cash budgeting is critical to a company’s financial information needs. The following information was extracted from the records of A & B Manufacturing Company Limited. The opening cash balances on January 01, 2021 was expected to be $30,000. The budgeted sales were as follows: Budgeted Sales Month Year $ November 2020 80,000 December 2020 90,000 January 2021 80,000 February 2021 75,000 March 2021 60,000 April 2021 70,000 Analysis of records shows that debtors settle according to the following pattern: 70% within the month of sale 30% the following month Extracts of the purchases budget were as follows: Purchases budget Month Year $ December 2020 65,000 January 2021 50,000 February 2021 75,000 March 2021 70,000 All purchases are on credit and past experience shows that 90% are settled in the month of purchases and the balance settled the month after. Salary is $15,000 per month Overheads of $20,000 per month (including depreciation of $5,000 monthly) are settled monthly. Taxation of $3,500 has to be settled in February and the company will receive an insurance claim of $50,000 in March Required: (b) Prepare a payment summary for purchases for the first quarter of 2021.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Question #2
Budgeted Sales
Month Year $
November 2020 80,000
December 2020 90,000
January 2021 80,000
February 2021 75,000
March 2021 60,000
April 2021 70,000
Analysis of records shows that debtors settle according to the following pattern:
70% within the month of sale
30% the following month
Extracts of the purchases budget were as follows:
Purchases budget
Month Year $
December 2020 65,000
January 2021 50,000
February 2021 75,000
March 2021 70,000
All purchases are on credit and past experience shows that 90% are settled in the month of purchases and the balance settled the month after.
Salary is $15,000 per month
Overheads of $20,000 per month (including depreciation of $5,000 monthly) are settled monthly.
Required:
(b) Prepare a payment summary for purchases for the first quarter of 2021.
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