Urgent Accounting question on cash budgets! PLEASE HELP!

[Qudsiyah]

hey guys!

i'm having trouble calculating the sales when there's a gross profit margin added to it!
i know its to be converted and all but i really dont get it!! .. please help! ...

possibly using the question from the CIE 9706 oct/nov p4 on "Rengaw Ltd"

please help!! thanks!

[Dasith]

you 4got 2 mention year!

[Qudsiyah]

you 4got 2 mention year!

owhh my bad.. its oct/nov 04

[Dasith]

You dont hav to calculate sales its already given
Gross profit margin is needed to calculate purchases / Cost of sales

[Qudsiyah]

OWHHH! kewll then!

so how do you calculate purchaseS? or creditors ?

[Dasith]

cash paid 4 purchases, hmm wait i think you got confused with da words in marking scheme , dont be too dependent on it!

[Dasith]

I think its cash recieved from debtors you want:
(since one months credit is allowed we assume we receive cash from credit customers exactly after 1 month)

so cash from debtors for October is 40000(previous month sales) x 3/4 = 30000
                               November is 48000 x 3/4=36000
                               ......(& continues till months are over)

[Qudsiyah]

I think its cash recieved from debtors you want:
(since one months credit is allowed we assume we receive cash from credit customers exactly after 1 month)

so cash from debtors for October is 40000(previous month sales) x 3/4 = 30000
                               November is 48000 x 3/4=36000
                               ......(& continues till months are over)

how do you get 3/4 ?

[Dasith]

25% is cash sales , So the other 75% is only credit sales i.e 3/4 got it?

[Dasith]

Now calculating cash paid 2 creditors

gross profit margin is 1/3 or 33.33%

Here we assume Cost of sales=Purchases (as opening stock is not given althaugh closing is given)
"Goods are purchased one month before sale and paid for two months after purchase"
it means september one is purchased in August & paid in octomber(2 months after purchase)

40000 is sales in september which contains 33.33% or 1/3 gross profit margin
cost of sales = 2/3 or 66.66% of 40000 which is equal to 26.6*(you can round it up to 27)