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Question Details:
Question 8
The following data and estimates are available for Budget Bindings Ltd for June, July & August:
June July August
Sales 55,000 70,000 90,000
Wages 18,000 21,000 25,000
Overheads 15,000 17,000 19,000
The following information is available regarding direct materials:
June July August September
Opening stock 8,000 10,000 15,000 16,000
Material usage 14,000 18,000 24,000
Notes
(i) 20% of the sales are for cash, the balance is received in the following month. The amount
received in June for May’s sales is £45,000.
(ii) Wages are paid in the month they are incurred.
(iii) Overheads include £2,000 per month for depreciation. Overheads are settled in the month
following. There is £13,000 to be paid in June relating to May’s overheads.
(iv) Purchases of direct materials are paid for in the month purchased.
(v) The opening cash balance on 1 June is £25,000.
(vi) A tax bill of £35,000 is to be paid in July.
Required
Calculate the amount of direct material purchases in each of the months of June, July and August.
(b) Prepare a cash budget for June, July and August.
(c) Prepare a profit and loss account for the three months ended 31 August.
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