cash budget
Watson Ltd is preparing its budgets for the next quarter. The following information has been drawn from the budgets prepared in the planning exercise so far:
Sales value | June (estimate) | £12,500 |
 | July (budget) | £13,600 |
 | August | £17,000 |
 | September | £16,800 |
Direct wages | £1,300 per month |  |
Direct material purchases | June (estimate) | £3,450 |
 | July (budget) | £3,780 |
 | August | £2,890 |
 | September | £3,150 |
Other information
? Watson sells 10 per cent of its goods for cash. The remainder of customers receive one month’s credit.
? Payments to material suppliers are made in the month following purchase.
? Wages are paid as they are incurred.
? Watson takes one month’s credit on all overheads.
Production overheads are £3,200 per month.
? Selling, distribution and administration overheads amount to £1,890 per month.
? Included in the amounts for overhead given above are depreciation charges of £300 and £190, respectively.
? Watson expects to purchase a delivery vehicle in August for a cash payment of £9,870.
? The cash balance at the end of June is forecast to be £1,235.
You are required to prepare a cash budget for each of the months July to September.