In ama practice mannual, Question no 5, cash budget at 4.17 budget chapter. How they have calculated purchases (under payment)?
112000, 128000, 120000, 160000, 144000, 96000
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READ POINT NO. (d)
"d) Budgeted sales of each month are purchased and paid for in the preceding month;"
Means for sale in February excel limited have purchased in january and sales price is 25% above cost ie. 125% of cost as given in point no. (c)
hence for January Cash outflow for purchases is:
(1,40,000*100/125) = 112000
in this way we will get purchase of each month.
that's why they have given sales of july so that we can calculate purchase price of june
"d) Budgeted sales of each month are purchased and paid for in the preceding month;"
Means for sale in February excel limited have purchased in january and sales price is 25% above cost ie. 125% of cost as given in point no. (c)
hence for January Cash outflow for purchases is:
(1,40,000*100/125) = 112000
in this way we will get purchase of each month.
that's why they have given sales of july so that we can calculate purchase price of june
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