The document provides guidance on calculating cash receipts, cost of sales, closing stock, purchases budget, and a cash budget for February and March. It explains that 75% of sales are for cash and 25% are on credit. It calculates cash receipts, cost of sales using a 33.33% markup, closing stock as 50% of next month's sales, and purchases as closing stock plus cost of sales minus opening stock. The cash budget shows receipts, payments, a surplus/deficit, and closing balances for February and March.

1. PGBM 01 Financial Management & Control
Additional Question
By
Andy Turton.
andy.turton@sunderland.ac.uk

2.  Calculate the cash receipts for February & March. (Remember 75% of sales
are for cash, 25% are on one month’s credit)
 Establish what the cost of sales is for each month. (Remember purchases
are sold at cost plus 33.33%)
 Calculate the closing stock at the end of December, January & February –
these are the only months we need (Closing stock is calculated as 50% of
next months sales and should be based on cost price)
 Calculate the purchases budget for January & February as purchases of one
month are paid in full the next month (Calculation used is Closing Stock +
Cost of Sales – Opening Stock = Purchases)
 Develop the Cash Budget for February & March
Suggested tips to answering the question

3. Cash Receipts in February
£
75% of February Sales (cash) 75% x 60,000 45,000
25% of January Sales (credit) 25% x 40,000 10,000
55,000
Cash Receipts in March
75% of March Sales (cash) 75% x 160,000 120,000
25% of February Sales (credit) 25% x 60,000 15,000
135,000
Sales Calculations

4. According to the question, the mark-up is 33.33%. This means that:
Sales 4
Less: Cost of Sales 3
Profit 1
So cost of sales represents 75% of sales value.
Closing Stock is calculated as follows : (50% of next months sales)
For December = 50% x £40,000 x 75% = £15,000 (will be opening stock for Jan)
For January = 50% x £60,000 x 75% = £22,500(will be opening stock for Feb)
For February = 50% x £160,000 x 75% = £60,000
Purchases Calculations

5. Purchases Budget
January February
Closing Stock £22,500 £60,000
Add : Cost of Sales £30,000 £45,000
£52,500 £105,000
Less : Opening Stock £15,000 £22,500
Purchases £37,500 £82,500
According to the question, purchases of one month are paid in full in the next
month. Therefore, purchases in January (£37,500) will be paid in February, and
purchases in February (£82,500) will be paid in March.
Purchases Calculations (cont.)

6. February (£) March (£)
Receipts:
Cash Sales 45,000 120,000
Debtors 10,000 15,000
55,000 135,000
Payments:
Creditors 37,500 82,500
Wages 3,000 5,000
Expenses 2,000 4,000
Purchase of Equipment 18,000
Dividend 20,000
Total Payments 60,500 111,500
Cash Surplus/ (Deficit) (5,500) 23,500
Opening Balance 1,000 (4,500)
Closing Balance (4,500) 19,000
Cash Budget