Bradman Ltd has the following budgeted unit sales figures for the six months from July 2005: July 800 August 600 September 700 October 900 November 1,000 December 900 The company makes and sells one product only, the unit costs and selling price of which are: Selling price N$70 Material A 2 kilos at N$5 per kilo N$10 Material B 1.5 kilos at N$6 per kilo N$9 Labour 2 hours at $10 per hour N$20 Variable overhead $8 per hour N$16 The following information is also available: Customers are allowed one month’s credit. Production takes place in the month of sale. Closing stocks of finished product are equal to 10% of the next month’s sales. Materials are purchased in the month before use and are paid for two months after purchase. Wages and variable overhead are paid for in the month of production. Fixed overhead is N$3,000 per month (including depreciation of N$500) payable in the month incurred. The opening cash balance at 31 August is expected to be N$20,000 in hand. Required: (a) Prepare for September only: (i) Sales Budget (in units and N$) (ii) Production Budget (units only) (iii) Raw Material Purchases Budget for both A and B (kilos and N$). (b) Prepare the Cash Budget for the months of September and October only.
Bradman Ltd has the following budgeted unit sales figures for the six months from July 2005: July 800 August 600 September 700 October 900 November 1,000 December 900 The company makes and sells one product only, the unit costs and selling price of which are: Selling price N$70 Material A 2 kilos at N$5 per kilo N$10 Material B 1.5 kilos at N$6 per kilo N$9 Labour 2 hours at $10 per hour N$20 Variable overhead $8 per hour N$16 The following information is also available: Customers are allowed one month’s credit. Production takes place in the month of sale. Closing stocks of finished product are equal to 10% of the next month’s sales. Materials are purchased in the month before use and are paid for two months after purchase. Wages and variable overhead are paid for in the month of production. Fixed overhead is N$3,000 per month (including depreciation of N$500) payable in the month incurred. The opening cash balance at 31 August is expected to be N$20,000 in hand. Required: (a) Prepare for September only: (i) Sales Budget (in units and N$) (ii) Production Budget (units only) (iii) Raw Material Purchases Budget for both A and B (kilos and N$). (b) Prepare the Cash Budget for the months of September and October only.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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QUESTION 1
Bradman Ltd has the following budgeted unit sales figures for the six months from July 2005:
July 800
August 600
September 700
October 900
November 1,000
December 900
The company makes and sells one product only, the unit costs and selling price of which are:
Selling price N$70
Material A 2 kilos at N$5 per kilo N$10
Material B 1.5 kilos at N$6 per kilo N$9
Labour 2 hours at $10 per hour N$20
Variable overhead $8 per hour N$16
The following information is also available:
Customers are allowed one month’s credit.
Production takes place in the month of sale.
Closing stocks of finished product are equal to 10% of the next month’s sales. Materials are purchased in the month before use and are paid for two months after purchase.
Wages and variable overhead are paid for in the month of production.
Fixed overhead is N$3,000 per month (including depreciation of N$500) payable in the month incurred.
The opening cash balance at 31 August is expected to be N$20,000 in hand.
Required:
(a) Prepare for September only:
(i) Sales Budget (in units and N$)
(ii) Production Budget (units only)
(iii) Raw Material Purchases Budget for both A and B (kilos and N$).
(b) Prepare the Cash Budget for the months of September and October only.
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