Question 3 Cash Budget Ebert Ltd sells about 20 of its produ

Question 3. Cash Budget Ebert Ltd sells about 20% of its product for cash. Ebert has the following payment experience for its credit sales: Paid in the month of sale Paid in the month after sale Paid in the second month after sale 30% 60% 8% Ebert\'s anticipated sales for the next few months are $240 000 $230 000 May Ebert purchased the following amounts of direct materials, all on account: $20 000 $25 000 Ebert pays 30% of its accounts payable in the month of purchase and the remaining 70% in the following month In July, direct labour cost was $57 000. August direct labour cost was $63 000 Typically the company pays 90% of direct labour cost in cash during the month, with the remainder paid in the following month August overhead amounted to $110 000, including $5 500 of depreciation. Ebert Company took out a loan of $10 000 on 1 May. Interest is 12% per year. The loan and all interest due will be repaid on 31 August. At the beginning of August the company had a bank balance of $3 500 Required Prepare a cash budget for August.

Solution

Workings:

Payment for direct material purchases = (30% x $30000) + (70% x $25000) = $9000 + $17500 = $26500

Payment for direct labor = (90% x $63000) + (10% x $57000) = $56700 + $5700 = 62400

Payment for overheads = $110000 - $5500 = $104500

Payment of interest on loan = $10000 x 12% x 4/12 = $400

Ebert Ltd.
Cash Budget
For the Month of August
Beginning cash balance	3500
Cash receipts from customers	242800
Total cash available	246300
Cash disbursements for:
Direct material purchases	26500
Direct labor	62400
Overheads	104500
Repayment of loan	10000
Payment of interest on loan	400
Total cash disbursements	203800
Ending cash balance	42500