Andrew Mitchell plc sells tents to customers for both recreational and
commercial use. Tents are sold directly from its warehouse/showroom in
Glasgow on both a retail (cash) and wholesale (credit) basis.
The company also operates a tent hire service from its premises in Glasgow.
January February March April May June July
in units 400 400 450 450 500 550 600
The company will retain 10% of the following month’s purchases as closing
inventory (stock) each month.
(a) Using appropriate information from Task 1 and the information provided
by Ms Cooper, prepare a Sales Budget for the first 6 months of 2016.
If completing this task on a spreadsheet, print one copy of your spreadsheet
in value view on one page.
Other information for the period is as follows:
1. Sales are divided 20% retail (cash only) and 80% wholesale (credit terms).
2. Selling prices:
Retail: £140 cash (no discount)
Wholesale terms: 1 month 10% discount on retail price
2 months 10% discount on retail price BUT a
surcharge of £2 per unit will be added for late
It is estimated that 25% of wholesale sales will be
3. The company has 4 large tents which are offered for hire only. Each tent
will be rented 6 times per month during March and April and 10 times per
month during May, June and July, at a hire charge of £40 per tent. Hire
charges are paid in the month prior to hire.
4. Andrew Mitchell plc purchases tents from suppliers at a cost of £80 per
tent. It will pay a 20% deposit of total purchase cost in the month of
purchase, with the remainder being paid the month after purchase.
5. Selling expenses of £1 per unit are payable one month after sales.
6. Target sales are 400 units per month. Bonuses are payable in the
following month for sales which exceed this target. The bonus payable to
sales staff is £4 per unit.
7. Monthly fixed costs (including depreciation of £300) are £900.
8. New fittings will be purchased for the showroom in March at a total cost
of £100,000. These will be paid for in 3 instalments beginning in April.
Payments for both May and June will be exactly twice the payment in
9. The cash and cash equivalents (cash and bank) balance at the start of
March is estimated to be £30,000.
(b) Prepare a Cash Budget for the four months March–June 2016, to show
monthly receipts and payments and the opening and closing bank/balance
for each month.
On completion of the task, print one copy of the spreadsheet in value view
and one copy in formulae view. Each printout must be on one page and
show gridlines and row and column headings.
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