Unit 15 - Tricky Question

Alec Baker
Alec Baker Registered Posts: 8 Regular contributor ⭐ ? ⭐
Hi everyone,

Please could someone tell me the significance of the opening/closing stock figures mentioned in this question (see attached, under notes (1). I can’t see what role that information has for this question as we aren’t a manufacturing/production company and are given no production or manufacturing costs. My course material doesn’t seem to provide an example like this question.
Any thought or attempts gratefully received. I have attached my answer on a different tread named "Unit 15 - Tricky Question Alec's Attempt'

Regards Alec

Notes: The following are the pieces of information to accompany the attached question.

Notes:

4. Delivery costs are 1% of sales revenue each month and are paid in the month they are incurred.

5. Admin/miscellaneous expenses are also paid as they are incurred.

6. Packaging expenses are paid two months after they are incurred. These costs were £1000 in may and will be the same in june.

7. The bank changes interest of % per month for overdraft, calculated on the closing bank balanace each month and payable the following month.

8. The bank overdraft at 1st July 20x0 is expected to be £155,000.

9. The loan repayments above refer to an interest free loan obtained by the company when they moved their business to a new bank.

10. The business has no depreciable fixed assets.

Required:
Prepare a monthly cash budget for each of the six months to 31 December 20x0, showing the cash balance at then end of the month.

You are informed that:

. There were no sales of fixed assets in 20x0
. The company does not pay interim dividends
. New debentures and issued in 20x0 were issued on 1st January

Comments

  • SandyHood
    SandyHood Registered, Moderator Posts: 2,034
    Can I check 2 items?
    1. Is the opening overdraft £155,00, or £15,500?
    2. Is the overdraft interest 0.1% per month?
    Sandy
    [email protected]
    www.sandyhood.com
  • Alec Baker
    Alec Baker Registered Posts: 8 Regular contributor ⭐ ? ⭐
    Hi Sandy.

    Thanks for having a look at my forum post.

    I can confirm that:

    7. The bank charges interest of 1% per month for the overdraft, calculated on the closing bank balance each month and payable the following month.
    8. The bank overdraft at 1 July 20X0 is expected to be £155,000.

    Regards

    Alec
  • currywala
    currywala Registered Posts: 14 Regular contributor ⭐ ? ⭐
    Tricky question

    The significance of opening closing stock level could be to work out the units produced or material used as I dont know the whole question cant answer specifically.
    Hope it will help
  • Alec Baker
    Alec Baker Registered Posts: 8 Regular contributor ⭐ ? ⭐
    Hi Currywala,

    Please see attachement (PDF) for first part of the question and the second part is written in the first post.

    regards
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