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in the kaplan text page 279-280 i found an additional question of full cash forecast but it has a production budget. my question is how did they find the sales units
this is part of the question
(i) Sales (before discounts) of the business’s single product, at a markup of 60% on production cost will be:
Month 1 2 3 4 5 6
($000) 96 96 92 96 100 10425% of sales will be for cash; the remainder will be on credit, for
settlement in the month following that of sale. A discount of 10% will be
given to selected credit customers, who represent 25% of gross sales.Workings
(W1) Month Month Month Month Month Month
1 2 3 4 5 6
Sales ($) 96,000 96,000 92,000 96,000 100,000 104,000
Sales units 12,000 12,000 11,500 12,000 12,500 13,000You cannot possibly have typed out all of the relevant information in the question (and I do not have the Kaplan study text), and so I have no idea where the sales units come from.
I can only assume that somewhere in the question you are told either that the saes price is $8 per unit or alternatively that the cost is $5 per unit!
The information about what sales are for cash etc. is obviously of no relevant whatsoever for calculating the number of units. That is only relevant in the cash budget itself.
yes on the second adjustment they did mention cost of $5 per unit ..
so how did they get the sales unit(ii) Production cost will be $5 per unit. The production cost will be made
up of:
Raw materials $2.50
Direct labour $1.50
Fixed overhead $1.00If the cost is $5 per unit, then the mark-up is 60% x $5 = $3 and therefore the selling price is $8 per units.
If the total sales revenue is $96,000 then the sales units must be 96,000/8 = 12,000 units.
It is the same approach for each of the other months.
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