As part of the expansion plan of Hardwood Ltd included setting up a separate production unit for contemporary designed furniture expected to start production in 2015. John wanted to ensure sufficient funds were available to finance the expansion based on current assumptions. The following information is available
Forecast of income and expenses for Feb – Sep 2015 are as follows:
Feb Mar Apr May Jun Jul Aug Sep
Sales 270 270 270 270 270 275 280 300
Purchase 80 80 80 80 95 95 100 105
Labour 75 75 85 85 85 85 85 85
Expenses 25 25 25 26 27 28 29 30
(Note all the figures in the table above are in £ 000)
1. Customers are given 2 months credit.
2. Purchases are paid after 1 month.
3. Labour costs are paid in the month incurred.
4. Other variable expenses are paid in the following month.
5. Fixed expenses of £35,000 per month are paid in the following month.
6. Purchase of new machinery costing £700,000 is scheduled for July.
7. Other financial information are:
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