PUNCAK Ltd’s budgeted production and sales of shoes for Dec 2020 – Apr 2021 months are as follows:

Production (UNITS) Sales (UNITS)
December 600 500
January 650 600
February 700 650
March 700 700
April 800 700

The selling price per unit will be £170. All sales will be made on credit.

The business plans to offer a cash discount (of 10% of the amount owed) to those customers who pay within the same of the month of sale. Customers for 40% of units sold are expected to qualify for the discount. Remaining 60% of the sales is expected to be paid during the next month (i.e one month later).

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It is planned that sufficient finished goods inventories for each month’s sales should be available at the end of the previous month.

For raw material purchases, the cost of raw material is£12 per unit. It is bought in the month of production and paid one month in arrears (i.e later).

The direct labour cost, which is variable with the level of production, is planned to be £17 per unit of finished production and it is paid in the month of production.

Overhead costs are planned to be £12,000 each month including £5,000 for depreciation. Overhead costs are paid in the same month.

Company bought an equipment for £330,000 in Jan and equal payments were made over Feb- Apr.

Opening cash balance at the start of Jan (1st) is £45,000.


Draw up a cash budget for the 4 months from 1 January to 30 April 2021, with a column for each month. The budget should, among other things, show each end-of-month cash balance.

paste answers and calculations into answer box so can copy it digitally ty.

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