Question 1

KeyLoad Company manufactures a special component (AA) that is used in the making of keyboards. As a step towards reducing uncertainty over the finance needs of the new business, the CFO has asked you to prepare a cash budget for KeyLoad Company for the eight (8) months period from 1 March 2016 till 31 October 2016.

You have collected some raw data from the concerned department heads and tabulated them as follows:

The following projected sales figures are given:

The estimated selling price per special component is $5.00.
The collections for the above sales forecast are as follows:
Collection from customers within the month of sale = 10%

Collection from customers following the month of sale = 50%Collection from customers following the second month of sales = 30%
10% of the sales are estimated to become irrecoverable.

Direct materials are acquired one month prior to production and are paid the following month of purchase. One special component (AA) uses 2 units of direct materials.