Aggrava Limited is currently preparing budgets for September to December. Its estimated sales figures in units are as follows: (financial information) = September October November December Sales (units) 5,569 14,234 14,847 15,121 Inventories at 31 August totalled 16,234 units, and inventories are to be kept at a constant level for all months except December, when opening inventories on 1 December are to be increased to 23,118. Inventories will revert to the normal level on 31 December. Inventories will cost £2 per unit throughout the period, and suppliers allow Aggrava Ltd to pay in the month following an order. Other relevant information is that 3,497 units were bought in August. Requirement 1: Prepare Aggrava Ltd's inventories budget (in units) for September to December. Requirement 2: Prepare the information relevant to inventories purchases that would appear in the cash budget for the period.
Aggrava Limited is currently preparing budgets for September to December. Its estimated sales figures in units are as follows: (financial information) = September October November December Sales (units) 5,569 14,234 14,847 15,121 Inventories at 31 August totalled 16,234 units, and inventories are to be kept at a constant level for all months except December, when opening inventories on 1 December are to be increased to 23,118. Inventories will revert to the normal level on 31 December. Inventories will cost £2 per unit throughout the period, and suppliers allow Aggrava Ltd to pay in the month following an order. Other relevant information is that 3,497 units were bought in August. Requirement 1: Prepare Aggrava Ltd's inventories budget (in units) for September to December. Requirement 2: Prepare the information relevant to inventories purchases that would appear in the cash budget for the period.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Aggrava Limited is currently preparing budgets for September to December. Its estimated sales figures in units are as follows:
| September | October | November | December | |
| Sales (units) | 5,569 | 14,234 | 14,847 | 15,121 |
Inventories at 31 August totalled
16,234
units, and inventories are to be kept at a constant level for all months except December, when opening inventories on 1 December are to be increased to
23,118.
Inventories will revert to the normal level on 31 December.Inventories will cost £2 per unit throughout the period, and suppliers allow
Aggrava
Ltd to pay in the month following an order. Other relevant information is that
3,497
units were bought in August.Requirement 1: Prepare
Aggrava
Ltd's inventories budget (in units) for September to December.Requirement 2: Prepare the information relevant to inventories purchases that would appear in the cash budget for the period.
Question content area bottom
Part 1
Requirement 1:
Aggrava
Ltd's inventories budget (in units) is as follows:(Fill in the relevant cells with its corresponding figures. Negative figures should be entered in brackets.)
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September
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October
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November
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December
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Opening inventories (A)
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Sales
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A - B = (C)
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Inventories purchase* (E - C)
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Closing inventories (E)
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* same as 'sales forecast' for each month except November and December, when inventories increase and then revert to normal.
Part 2
Requirement 2: Relevant information relating to inventories purchases for the cash budget is as follows:
(Fill in the relevant cells with its corresponding figures.)
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August
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September
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October
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November
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December
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Inventories purchased (units) (A)
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Cost per unit (£) (B)
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2
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2
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2
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2
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2
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Cost of inventories bought (£) [A*B = (C)]
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