Question 1 The management accountant at Miller Merchandising & More, Odail Russell is in the process of preparing the cash bu
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Question 1
The
|
Month |
Cash Sales |
Sales On Account |
Purchases |
|
August |
$85,000 |
$640,000 |
$420,000 |
|
September |
$70,000 |
$550,000 |
$550,000 |
|
October |
$88,550 |
$600,000 |
$500,000 |
|
November |
$77,160 |
$800,000 |
$600,000 |
|
December |
$174,870 |
$500,000 |
$450,000 |
- An analysis of the records shows that trade receivables are settled according to the following credit pattern, in accordance with the credit terms 4/30, n90:
50% in the month of sale
30% in the first month following the sale
20% in the second month following the sale
-Expected purchases include monthly cash purchases of 5%. All other purchases are on Accounts payable are settled as follows, in accordance with the credit terms – 2/30, n60:
60% in the month in which the inventory is purchased
40% in the following month
- Fixed operating expenses which accrue evenly throughout the year, are estimated to be $1,680,000 per annum, (including
- Wages and salaries are expected to be $2,280,000 per annum and will be paid
- Other operating expenses are expected to be $108,000 per quarter and will be settled
- In the month of November, an old motor vehicle, which cost $650,000, will be sold to an employee at a gain of $30,000.
- Computer equipment, which is estimated to cost $320,000, will be acquired in November. The manager has made arrangements with the dealer to make a cash deposit of 50% of the amount upon signing of the agreement in November, with the balance to be settled in four equal monthly instalments, starting in December 2021
-The management of Miller Merchandising Company has negotiated with a tenant to rent office space to her beginning November 1. The rental is $624,000 per annum. The first month’s rent along with one month’s safety deposit is expected to be collected on November 1. Thereafter, monthly rental income becomes due at the beginning of each month
-
- A
- The cash balance at December 31, 2021 is expected to be an overdraft of $236,000.
QUESTION :
prepare a:
1.
A cash budget, with a total column, for the quarter ending December 31, 2021, showing the expected cash receipts and payments for each month and the ending cash balance for each of the three months, given that no financing activities took place.
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