Unit 15 - Tricky Question

Alec Baker

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

SandyHood

Can I check 2 items?

1. Is the opening overdraft £155,00, or £15,500?
2. Is the overdraft interest 0.1% per month?

Alec Baker

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

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

Hi Currywala,

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

regards