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Budgets Q1.

Nestle Ltd is undertaking a project for which it has prepared the following budget for the first five months of 2010 Sales budget (units) January February March April May 12200 10400 9800 10800 15600

Inventory of finished goods at the end of every month is to be equal to 25% of the sales estimate for the st next month. On 1 Jan 2010 there were 2700 units of product on hand. There are no WIP at the end of every month. Every unit of the product requires two types of material in the following quantity. Material A 4kg Material B 5 kg Material equal to one half of the requirement of next months production is to be in hand at the end of st every month. This requirement was met on 1 Jan 2010. Prepare the following budget for the quarter ending 31 march 2010. a. b. Production budget Material purchase budget.

Q2. Chemicals Ltd manufactures two products AB and CD by mixing the following raw material in the proportion shown below Raw material Product AB Product CD A 80% B 20% C 50% D 50% The finished weights of products AB and CD are equal to the weight of their ingredients. During the month of June, it is expected that 60 tonnes of AB and 200 tonnes of CD will be sold. Actual and budgeted inventories for the month of June are as follows: Material A B C D Product AB Product CD Actual inventory (1 June) quantity (tonnes) 15 10 200 250 10 50

Budgeted inventory (30 June) quantity (tonnes) 20 40 300 200 5 60


The purchase price of material for June is expected to be as follows: Material Cost per tonne A 500 B 400 C 100 D 200

All material will be purchased on 3 June. Prepare a. b. c. Production budget for the month of June Material requirement budget for June Material purchase budget indicating the expenditure for material for the month of June.


Q3. The following particulars for two periods are available from the records of a company undertaking a project to manufacture special chairs for physically handicap Period 1 60,000 Period 2 80,000

Output Cost Direct materials 1,20,000 1,60,000 Direct wages 3,00,000 4,00,000 Direct expenses 60,000 80,000 Prime cost 4,80,000 6,40,000 Overheads Consumables material 15,000 20,000 Shop floor 6,000 8,000 Maintenance and repair 8,000 10,000 Inspection 1,600 1,800 Depreciation 10,000 10,000 Insurance 5,000 5,000 Salaries 6,000 6,000 Total overhead 51,600 60,800 Total factory cost 5,31,600 7,00,800 Total production at 100% capacity is 1, 00,000 units. The company is contemplating to calculate cost at various levels. Prepare a flexible budget for 70% and 90% capacity. Maintenance and repair and inspection are semi-variable cost. Q4. A project is currently running at 50% capacity and produces 5000 units at the cost of Rs 90 per unit as per details given below Material Labour Factory overheads 15 15(Rs 6 fixed) 50

Administrative overheads 10(Rs 5 fixed) The current selling price is Rs 100 per unit. At 60% working, material cost per unit increases by 2% and selling price per unit falls by 2%. At 80% working, material cost per unit increases by 5% and selling price

falls by 2.5%. Prepare a flexible budget showing profit of the project at 60% and 80% and offer your comments. Q5. S&T Company has given the following particulars. You are required to prepare a cash budget for three st months ending 31 December 2004 a. Months Sales August 10,000 September 11,000 October 12,000 November 13,000 December 15,000 b. credit terms are: Material 5,100 5,000 4,900 5,000 5,400 Wages 1,900 1,900 2,000 2,100 2,300 Overheads 950 1,100 1,300 1,200 1,500

Sales/ Debtor- 10% sales are on cash basis, 50% of the credit sales are collected next month and the balance in the following month: Creditors: material 2months, Wages 1/5 month, Overheads month c. d. e. f. g. 6. cash balance on 1 October, 2004 is expected to be Rs 4000 For a machinery installed in august, 2004 at 50,000, the monthly installment of Rs 2000 is payable from October onwards. st Dividend at 10% on preference share capital of Rs 1,50,000 will be paid on 1 December 2004 Advance to be received for sale of vehicle Rs 10,000 in November. Income tax advance to be paid in December Rs 2,500

The following quarterly result is expected by XYZ next year in thousands. Quarter 1 2 3 4 Sales 7500 10500 18000 10500 Cash payment Production 7000 10,000 8,000 8,500 cost Selling admin 1000 2000 2900 1600 and other cost Purchase of 100 1100 2100 2100 plant and other fixed asset rd Debtors at the end of the quarter are 1/3 of sales for the quarter. The opening balance of debtors is Rs 30, 00,000. Cash in hand at the beginning of the year is 6, 50,000 and the desired minimum balance is Rs 5, 00,000. Borrowings are made in multiples of Rs 10,000 at the beginning of the quarter. Interest charges may be ignored. You are required to prepare: i. ii cash budget by quarter for the year state the amount of loan outstanding at the end of the year.