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QUESTION 2016 Nur SdnBhd is in the process of preparing the budget for 2016. The following information has been compiled: 1. December January February March 2015 2016 2016 Sales units 3,000 3,500 3,600 3,800 Purchases (RM) 18,000 17,500 20,000 20,000 Wages (RM) 20,000 19,000 20,000 24.000 Factory costs (RM) 8,500 9,500 11,000 12,000 Selling costs (RM) 7.000 9,000 8,000 11,000 2. Selling price is RM25.00 per unit. A cash discount of 5% is given on all cash sales and for debtors who pay in the month of sales. a. 10% of sales are cash sales b. 25% of credit sales will be settled at the end of the month of sales C. Remaining credit sales will be settled in the month following sales 3. Material purchasing costs are to be settled one month after receipt of materials. 4. Wages are paid at the end of the month. 5. Factory costs include RM2, 000 per month for depreciation. The factory costs are to be settled after one month. 6. Selling costs are expected to be paid in the following month. 7. Cash balance at the end of December 2015 is RM3,000. Required: a) Prepare the cash budget for the three months ended March 2016. (14 marks) b) Briefly explain how a budget can be used to motivate managers. (2 marks) c) Briefly explain how the principle budget factor will affect budget preparation. (2 marks) d) Explain how 'Cash surplus' and 'Cash Deficiency' arise. What possible actions would you recommend to the managers under each of the above situations

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