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(Solved): Use the information given below to prepare the following for the first three months of operations (i ...



Use the information given below to prepare the following for the first three months of operations (i.e. January, February and March 2025): 4.1 Debtors Collection Schedule (6 marks) 4.2 Cash Budget (14 marks) INFORMATION The following information relates to Crompton Manufacturers which will commence business on 01 January 2025 with a capital contribution of R400 000 cash: 1. A loan of R200 000 is expected to be obtained from Len Bank on at the start of January 2025. A repayment of R5 000 per month plus interest at a rate of 12% per year will be paid at the end of each month, commencing January 2025. 2. New machinery and equipment will be purchased on 02 January 2025 for R180 000. A deposit of 20% will be paid immediately. The balance of the debt as well as finance charges of R16 000 will be paid in 10 equal monthly instalments commencing February 2025. 3. Estimated production and sales are as follows: Production (units) Sales (units) January 4 000 3 000 February 10 000 9 000 March 14 000 12 000 April 17 000 14 000 4. The sales price will be set at R40 per unit. Cash sales are expected to comprise 70% of the total sales. A cash discount of 10% will be granted to these customers. The balance of the sales will be on credit. Thirty percent (30%) of the amount owing is expected to be received in the month of the sale and a discount of 2.5% will be granted to these customers. The balance is expected to be collected the month after the sale. 5. Variable manufacturing costs per unit are forecast as follows: Direct materials R16 Direct labour R9 Overheads R7 6. Direct materials will be purchased on credit to meet the production requirements of each month. Creditors are expected to be paid in the month after the purchase. 7. Direct labour costs are settled monthly. 8. Variable manufacturing overheads will be paid in the month in which they are incurred. 9. Fixed costs amount to R30 000 per month (excluding depreciation of R1 500 per month) and are paid monthly.



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