Rockets and More Ltd. Is concerned about the uncertain nature of its market for the upcoming year and has prepared budgeted results on 90%, 100% and 105% activity as follows: Output Revenue Less: Materials Labour Costs Production overhead costs Revenue Less: Expenses Materials costs Labour costs Prod. Overhead costs 217,500 Administrative Costs 120,000 Selling and distribution cost 70,000 1,185,000 Administration costs Selling and distribution costs Net profit 90% 45,000 $ 1,350,000 Required: A. Net Profit 200,000 Only 37,500 units have been sold with the following results: S B. 337,500 440,000 165,000 100% 50,000 S 1,500,000 375,000 485,000 235,000 130,000 75,000 1,300,000 311,750 351,500 171,250 117,500 66,500 105% 52, 500 $ 1,575,000 393,750 507,500 243,750 135,000 77,500 1,357,500 217,500 S 1,075,000 1,018,500 56,500 i. The budgeted selling price is $30 per unit ii. All production is sold iii. The fixed element of the budgeted costs will remain unchanged at all levels of production Prepare a statement for the year showing the flexible budget at the actual level of activity. Examine the variances of $20,000 or greater, analysing the possible reasons for such variances.
Rockets and More Ltd. Is concerned about the uncertain nature of its market for the upcoming year and has prepared budgeted results on 90%, 100% and 105% activity as follows: Output Revenue Less: Materials Labour Costs Production overhead costs Revenue Less: Expenses Materials costs Labour costs Prod. Overhead costs 217,500 Administrative Costs 120,000 Selling and distribution cost 70,000 1,185,000 Administration costs Selling and distribution costs Net profit 90% 45,000 $ 1,350,000 Required: A. Net Profit 200,000 Only 37,500 units have been sold with the following results: S B. 337,500 440,000 165,000 100% 50,000 S 1,500,000 375,000 485,000 235,000 130,000 75,000 1,300,000 311,750 351,500 171,250 117,500 66,500 105% 52, 500 $ 1,575,000 393,750 507,500 243,750 135,000 77,500 1,357,500 217,500 S 1,075,000 1,018,500 56,500 i. The budgeted selling price is $30 per unit ii. All production is sold iii. The fixed element of the budgeted costs will remain unchanged at all levels of production Prepare a statement for the year showing the flexible budget at the actual level of activity. Examine the variances of $20,000 or greater, analysing the possible reasons for such variances.
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.
Question
Transcribed Image Text:Rockets and More Ltd. Is concerned about the uncertain nature of its market for the upcoming
year and has prepared budgeted results on 90%, 100% and 105% activity as follows:
Output
Revenue
Less:
Materials
337,500
Labour Costs
440,000
Production overhead costs
217,500
Administrative Costs
120,000
Selling and distribution cost 70,000
1,185,000
Revenue
Less: Expenses
Materials costs
Labour costs
Prod. Overhead costs
Administration costs
Selling and distribution costs
Net profit
90%
45,000
Required:
A.
$
1,350,000
Net Profit
165,000
200,000
Only 37,500 units have been sold with the following results:
S
B.
100%
50,000
S
1,500,000
375,000
485,000
235,000
130,000
75,000
1,300,000
311,750
351,500
171,250
117,500
66,500
105%
52, 500
$
1,575,000
393,750
507,500
243,750
135,000
77,500
1,357,500
217,500
$
1,075,000
1,018,500
56,500
i. The budgeted selling price is $30 per unit
ii. All production is sold
iii. The fixed element of the budgeted costs will remain unchanged at all levels of
production
Prepare a statement for the year showing the flexible budget at the actual level of activity.
Examine the variances of $20,000 or greater, analysing the possible reasons for such
variances.
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