Accounting-TechCo Ltd is a retail distributor for MZB-33 computer hardware units

Assignment 2 – Cash budget
TechCo Ltd is a retail distributor for MZB-33 computer hardware units. Sales forecasts for the first six
months of 2014 are as follows:
Units
Dollars
January
130
390,000
February
120
360,000
March
110
330,000
April
90
270,000
May
100
300,000
June
125
375,000
Total
675
2,025,000
Total sales consist of 25% cash sales, 30% credit cards sales and 45% sales on account. The cash sales
and cash from credit cards sales are received in the month of sale. Credit card sales are subject to a
4% discount. The cash receipts for sales on account are 70% in the month following the sale and 28%
in the second month after the sale. The remaining 2% are estimated to be uncollectable.
TechCo’s month end inventory requirement for computer hardware units is 30% of the next month’s
sales. The purchase price is $1800 per unit. Approximately 60% of the purchases in a month are paid
in that month and the rest paid in the following month.
Selling and administration expenses are equal to 10% of the current month’s sales, including $2000
of depreciation. These expenses are paid as incurred.
Required:
1. What are the four elements of the budgeting cycle? (8 marks)
2. Prepare a schedule of cash collections for April 2014. (13 marks)
3. Prepare the budgets for purchases in units and in dollars for the months of March and April.
(16 marks)
4. Prepare a schedule of cash payments for April 2014. (12 marks)
5. Prepare a cash budget for April 2014, assuming the cash balance as of 1 April is $10,000.
(16 marks)

10 marks for clearly written and presented answers. Word limit: 500 words.
TOTAL: 75 marks.