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1
C.A. FINAL BUDGET & BUDGETARY CONTROL
Solution to Q. 1
(i) Statement of the Number of Units of the Product Proposed to be Sold
Selling Price per unit ₹ 90
Total Sales Revenue ₹ 1,26,00,000
Number of Units of the Product (proposed to be sold)
1,40,000 units
(₹ 1,26,00,000 / ₹ 90)
Working Notes
Selling Price per unit of the Product
₹
Direct Material: A: 3.0 lbs × ₹ 6 18
B: 1.5 lbs × ₹ 4 6
Direct Labour:
Machine Shop: 7 hrs × ₹ 4 28
Assembly Section: 2.5 hrs × ₹ 3.20 8
Overhead 33 ⅓% of Direct Labour [(₹ 28+₹ 8) × 33.33...%] 12
Total Cost per unit 72
Add: Profit 20% of Selling Price (or 25% on Cost) 18
Selling Price per unit 90
(ii) Materials A & B to be Purchased (in Rupees)
Material Consumption Closing Balance
Opening Balance
Purchase Purchase Price
Amount
(lbs) (lbs) (lbs) (lbs) (₹) (₹)
A 4,35,000
(1,45,000* × 3)
30,000 54,000 4,11,000 6 24,66,000
B 2,17,500
(1,45,000* × 1.5)
66,000 33,000 2,50,500 4 10,02,000
Total 34,68,000
(*) Number of units of finished goods to be manufactured during the year
= Sales + Closing Stock – Opening Stock
= 1,40,000 + 25,000 – 20,000
= 1,45,000 units
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / BUDGET & BUDGETARY CONTROL
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(iii) Capacity Utilisation Statement - Machine Shop & Assembly Section
Particulars Machine Shop Assembly Section
Hours Available# 11,04,000
(600 person × 1,840 hrs.)
3,31,200
(180 persons × 1,840 hrs.)
Hours Required 10,15,000
(1,45,000 units × 7 hrs.)
3,62,500
(1,45,000 units × 2.5 hrs.)
Surplus/(Deficit) Hours 89,000 (31,300)
Capacity Utilization 91.94% 109.45%
(#) Hours Available [5 Days × 8 Hrs. × 52 Weeks – Idle Time (96 + 80 + 64)]
Comments
Above statement shows that there are 89,000 excess hours in the machine shop and also a shortage of 31,300 hours in the assembly section. If the workers are interchangeable, the assembly section should utilise the services of workers which may be moved from the machine shop to meet the production target of 1,45,000 units. If the workers are not interchangeable, the assembly section may either resort to overtime working or increase the strength of workers to achieve the budgeted production.
Solution to Q. 2
Working Notes:
1) Production Budget for the Budget Period
Particulars X Y Z
Budgeted Qty. to be sold 9,000 15,000 12,000
Add: Budgeted Closing Stock Qty. 1,000 - 2,000
Total Requirement 10,000 5,000 14,000
Less: Budgeted Opening Stock Qty. - - 5,000 - 4,000
Budgeted Qty. to be produced 10,000 10,000 10,000
a) Statement showing the Direct Labour Hours
Particulars Hours
Gross hrs. per worker for the budget period 624
(8 hrs. 6 days 13 weeks)
Less: Hours lost due to leave & holidays - 124
Effective labour hours per worker 500
b) Statement showing the Budgeted Labour Cost for the Budget Period
Particulars Operation A
Operation B
Operation C
Budgeted hrs. required
For Product X (hrs. p.u. units) 3,000 - 1,500
For Product Y (hrs. p.u. units) 7,000 2,000 1,000
For Product Z (hrs. p.u. units) 5,000 4,000 -
Total hrs. required 15,000 6,000 2,500
Rate per hour ₹ 16 ₹ 20 ₹ 24
Budgeted Labour Cost ₹ 2,40,000 ₹ 1,20,000 ₹ 60,000
Overall Budgeted Labour Cost = ₹ 4,20,000
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / BUDGET & BUDGETARY CONTROL
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c) No. of operatives required = worker per hrs. Budgeted
hour labour Budgeted
Operation A = 500
15,000 = 30
Operation B = 500
6,000 = 12
Operation C = 500
2,500 = 5
Total operatives required = 47
Solution to Q. 3
(i) Quarterly Production Budget in Quantity
Particulars Q I Q II Q III Q IV
Budgeted qty. to be sold 18,000 22,000 25,000 27,000
Add: Budgeted Cl. Stock Qty. 6,600 7,500 8,100 *7,400
(30% of next quarters sales)
Total Requirement 24,600 29,500 33,100 34,400
Less: Budgeted Op. Stock Qty. - 5,400 - 6,600 - 7,500 - 8,100
Budgeted Qty. to be produced 19,200 22,900 25,600 26,300
* Since opening stock is 6,000 units whereas as per the production pattern it is supposed to be 18,000 30% = 5,400, it indicates that the company maintains a buffer stock of 600 units. Closing stock required is 8,000 units but since buffer stock is 600 units hence only 7,400 units have been provided.
(ii) BEP Sales (Units) = p.u. onContributi
Cost Fixed
= 34.50 - 40
2,20,000=
5.50
2,20,000
= 40,000 units
The sales in Quarter II becomes 40,000 units (18,000 + 22,000) & hence the company achieves Break Even Point in Quarter II.
Solution to Q. 4
1) Sales budget for the two types of tyres
Particulars Bus Tyres Bike Tyres
Budgeted Qty. to be sold 12,500 60,000 Selling price per tyre ₹ 15,000 ₹ 4,500
Budgeted sales amount ₹ 18,75,00,000 ₹ 27,00,00,000
Overall budgeted sales amount = ₹ 45,75,00,000
2) Production budget for the two types of tyres
Particulars Bus Tyres Bike Tyres
Budgeted Qty. to be sold 12,500 60,000 Add: Budgeted Closing Stock Qty. 2,000 5,000
Total Requirement 14,500 65,000 Less: Budgeted Opening Stock Qty. - 2,500 - 6,000
Budgeted Qty. to be produced 12,000 59,000
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / BUDGET & BUDGETARY CONTROL
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3) Direct Material Budget (Consumption & Purchases)
a) Consumption Budget
Particulars Rubber Steel Belts
Budgeted Qty. to be consumed For Bus Tyres (lbs per tyre 12,000) 4,20,000 54,000
For Bike Tyres (lbs per tyre 59,000) 8,85,000 1,18,000
Total Budgeted Qty. 13,05,000 1,72,000 Rate per lb. ₹ 150 ₹ 100
Budgeted Consumption Amt. ₹ 19,57,50,000 ₹ 1,72,00,000
Total Budgeted Consumption Amt. = ₹ 21,29,50,000
b) Purchases Budget
Particulars Rubber Steel Belts
Budgeted Qty. to be consumed 13,05,000 1,72,000 Add: Budgeted Closing Stock Qty. 60,000 6,000
Total Requirement 13,65,000 1,78,000 Less: Budgeted Opening Stock Qty. - 75,000 - 7,500
Budgeted Qty. to be purchased 12,90,000 1,70,500 Rate per lb. ₹ 150 ₹ 100
Budgeted Purchase Amt. ₹ 19,35,00,000 ₹ 1,70,50,000
Overall Budgeted Purchase Amt. = ₹ 21,05,50,000
4) Direct Labour Budget
Particulars Moulding Dept. Finishing Dept.
Budgeted Labour hrs. required For Bus Tyres (hrs. per tyre 12,000) 2,400 1,200
For Bike Tyres (hrs. per tyre 59,000) 5,900 2,950
Total hrs. required 8,300 4,150 Rate per hr. ₹ 650 ₹ 750
Budgeted Labour Cost ₹ 53,95,000 ₹ 31,12,500
Overall Budgeted Labour Cost = ₹ 85,07,500
5) Factory Overhead Budget
Particulars Amount (₹)
Indirect Materials 85,28,000
Indirect Labour 79,40,000
Depreciation 49,16,000
Power & Light 63,00,000
2,76,84,000
6) Cost of Goods Sold Budget
Particulars Amount (₹)
Material Consumed (Part 3) 21,29,50,000
Direct Labour (Part 4) 85,07,500
Factory OHs (Part 5) 2,76,84,000
Factory Cost/Cost of Production of Goods Produced 24,91,41,500
Add: Opening Stock of Finished Goods 2,00,25,500
Less: Closing Stock of Finished Goods - 1,63,23,900
Cost of Production of Goods Sold 25,28,43,100
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / BUDGET & BUDGETARY CONTROL
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Solution to Q. 5
i) Production budget for the quarter period
Particulars Qty. (Bags)
Budgeted Qty. to be sold 50,000
Add: Budgeted Closing Stock Qty. 11,000
Total Requirement 61,000
Less: Budgeted Opening Stock Qty. - 15,000
Budgeted Qty. to be Produced 46,000
ii) Raw Material purchase budget for the said quarter
Particulars Material Q Material R Empty Bags
Budgeted Qty. to be consumed 1,15,000 3,45,000 46,000
(46,000 Qty. per bag of FG)
Add: Budgeted Closing Stock Qty. 26,000 47,000 28,000
Total Requirement 1,41,000 3,92,000 74,000
Less: Budgeted Opening Stock Qty. - 32,000 - 57,000 - 37,000
Budgeted Qty. to be purchased 1,09,000 3,35,000 37,000
Rate per kg./bag ₹ 1.20 ₹ 0.20 ₹ 0.80
Budgeted Purchase Amt. ₹ 1,30,800 ₹ 67,000 ₹ 29,600
Overall Budgeted Purchase Amt. = ₹ 2,27,400
iii) Budgeted Variable Cost per bag of finished goods
Particulars Amount (₹)
Material Q cost (2.5 kgs. ₹ 1.20) 3
Material R cost (7.5 kgs. ₹ 0.20) 1.50
Empty Bag Cost 0.80
Labour Cost (₹ 5/60 9) 0.75
Variable Mfg. Cost 0.45
Variable Selling & Admn Expense (5% of ₹ 9) 0.45
6.95
iv) Statement showing the Budgeted Net Income for the said quarter
Particulars Total (₹) Per Bag (₹)
a) Sales (50,000 SP p kg. 4,50,000 9
b) Total Cost (for 50,000 kgs.)
Variable Cost (50,000 ₹ 6.95) 3,47,500 6.95
Fixed Cost (30,000 + 25,000) 55,000 1.10
4,02,500 8.05
c) Profit (a – b) 47,500 0.95
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / BUDGET & BUDGETARY CONTROL
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Solution to Q.6
1) Production Budget in respect of 3 types of Furniture for the quarter ending 30.6.2017:
Particulars Chairs Tables Benches
Budgeted Qty. to be sold 4,200 800 500 (+) Budgeted Closing Stock Quantity 200 300 50 Total Requirement 4,400 1,100 550 (-) Budgeted Opening Stock Quantity (400) (100) (50)
Budgeted Quantity to be produced 4,000 1,000 5,000
2) Raw Material Purchase Budget in quantity and valuation for the quarter ending 30.6.2017:
Particulars Timber Upholstery
Timber to be consumed for - - Chair (4,000 0.5) 2,000 -
- Tables (1,000 1.2) 1,200 -
- Benches (500 2.5) 1,250 - Upholstery to be consumed for - - Chair (4,000 0.25) - 1,000 Budgeted Qty. to be consumed 4,450 1,000 (+) Budgeted Closing Stock Quantity 650 260 Total Requirement 5,100 1,260 (-) Budgeted Opening Stock Quantity (600) (400) Budgeted Quantity to be produced 4,500 860 Rate per cu. ft/sq. yds) 50 20
Budgeted Purchase Amount 2,25,000 17,200
Overall Budgeted Purchase Amount
Particulars Amt. (₹)
Timber Cost 2,25,000 Upholstery Cost 17,200 2,42,200 Fixing & Finishing Material Cost (5% of Total) 12,110
Overall Budgeted Purchase Amount 2,54,310
3) Direct Wages Cost Budget for the quarter ending ………………
Particulars Carpenter Fixer & Finisher
Time required by Carpenter
- Chair (4,000 45/60) 3,000 -
- Tables (1,000 60/60) 1,000 -
- Benches (500 75/60) 625 -
Time required by Fixer & Finisher
- Chair (4,000 15/60) - 1,000
- Tables (1,000 15/60) - 250
- Benches (500 30/60) - 250
Total hours required 4,625 1,500
Rate per hour 6 4.8
Budgeted Labour Cost 27,750 7,200
Overall Budgeted Labour Cost ₹ 34,950
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / BUDGET & BUDGETARY CONTROL
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4) Statement showing Variable Cost of Manufacturing/Unit of three products:
Particulars Chairs Tables Benches
- Timber Cost (cu. ft. p.u. ₹ 50) 25 60 125
- Upholstery Cost (sq. yds. P.u. ₹ 20) 5 - -
30 60 125
- Fixing & Finishing Material Cost (5% of the above) 1.5 3 6.25
(45 mins) – Carpenter Wages (Hr. p.u. ₹ 6) 4.5 6 7.5
(12 mins) – Fixer & Finisher’s Wages (₹ 4.8) 1.2 1.2 2.4
Total Variable Cost 37.20 70.20 141.15
5) Statement showing the budgeted profit for the quarter ending 30.6.2017:
Particulars Amt. (₹)
A) Sales
Chairs (4,200 ₹ 50) 2,10,000
Tables (800 ₹ 85) 68,000
Benches (500 ₹ 158) 79,000
3,57,000
B) Total Cost
- Variable Cost
Chairs (4,200 37.20) 1,56,240
Tables (800 70.20) 56,160
Benches (500 141.15) 70,575
- Fixed Cost (8,000 3 months) 24,000
3,06,975
C) Profit (A – B) 50,025
Solution to Q. 7
Working Notes
1) Break up of Production OHs (Semi Variable Cost)
Units Variable Cost
(@ ₹ 25* p.u.)
Fixed Cost Total
10,000 2,50,000 3,50,000 6,00,000
12,000 3,00,000 3,50,000 6,50,000
2) Break up of Selling OHs (Semi Variable Cost)
Units Variable Cost
(@ ₹ 10* p.u.)
Fixed Cost Total
10,000 1,00,000 1,20,000 2,20,000
12,000 1,20,000 1,20,000 2,40,000
Variable Cost p.u. = Qty. in Diff.
Amt.in Diff.=
10,000 - 12,000
2,20,000 - 2,40,000=
2,000
20,000= 10*
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / BUDGET & BUDGETARY CONTROL
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1) Flexible Budget for the next year at 75% & 90% capacity levels
Particulars 60% capacity
12000 units
75% capacity
15000 units
90% capacity
18000 units
Total p.u. Total p.u. Total p.u.
Materials 1,20,000 10 1,57,500 10.50 1,89,000 10.50
Labour
96%
3%16
1,92,000 16 2,57,500 17.48 3,09,000 17.18
Production OHs
Variable 3,00,000 25 3,97,500 26.50 4,77,000 26.50
Fixed 3,50,000 29.17 3,85,000 25.67 4,27,000 23.72
75% cap = 3,50,000 + 10%
90% cap = 3,50,000 + 22%
Admn OHs 1,20,000 10 1,38,000 9.20 1,38,000 7.67
Selling OHs
Variable 1,20,000 10 1,65,000 11 1,98,000 11
Fixed 1,20,000 10 1,29,600 8.64 1,29,600 7.20
Total Cost 13,22,000 110.17 16,30,000 108.67 18,67,600 103.76
2) Computation of Sales Value at 75% Capacity
Particulars Amount (₹)
Cost at 75% cap. level 80 16,30,100
Add: Profit 20 4,07,525
Sales Value 100 20,37,625
3) Evaluation of Export Order
Particulars Amount (₹)
Sales for 3000 Export Units (3,000 ₹ 92) 2,76,000
Cost for 3000 Units (18,67,600 – 16,30,100) 2,37,500
Incremental Profit 38,500
The export order should be accepted.
Solution to Q. 8
1) Flexible Budget at various capacity levels
Particulars 50,000 units 80,000 units 1,00,000 units
Total p.u. Total p.u. Total p.u.
a) Sales (₹ 40 – ₹ 4) 20,00,000 40 32,00,000 40 36,00,000 36
b) Variable Cost
Direct Materials 6,25,000 12.50 10,00,000 12.50 12,00,000 12
(₹ 12.50 – 4%)
Direct Wages 2,50,000 5.00 4,00,000 5.00 5,00,000 5.00
Variable cost of semi variable cost
25,000
0.50
40,000
0.50
50,000
0.50
Variable Factory OHs 2,50,000 5.00 4,00,000 5.00 5,00,000 5.00
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / BUDGET & BUDGETARY CONTROL
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Variable Selling & Admn OHs (2 + 4%)
1,00,000
2.00
1,60,000
2.00
2,08,000
2.08
12,50,000 25 20,00,000 25 24,58,000 24.5
c) Contribution (a – b) 7,50,000 15 12,00,000 15 11,42,000 11.42
d) Fixed Cost
Fixed cost in semi variable cost
30,000
0.60
30,000
0.375
30,000
0.30
Fixed Factory OHs (60,000 5)
3,00,000
5.00
3,00,000
3.75
3,00,000
3
Fixed Selling & Admn OHs (60,000 6)
3,60,000
7.20
3,60,000
4.50
3,60,000
3.60
Interest on Investments (5,00,000 12%)
-
-
60,000
0.75
60,000
0.60
Addl. Fixed Cost - - 2,00,000 2.50 2,80,000 2.80
Dep. on New Investment (5,00,000 10%)
-
-
50,000
0.625
50,000
0.50
Special Advt. Campaign - - 50,000 0.625 - -
6,90,000 13.80 10,50,000 13.125 10,80,000 10.80
e) Profit (c – d) 60,000 1.20 1,50,000 1.875 62,000 0.62
In order to earn maximum profit, the company should prefer working at 80,000 units p.a.
2) Break Even Point (Units) = p.u. onContributi
Cost Fixed
At 50,000 units (Before Expansion) = 15
6,90,000= 46,000 units
At 80,000 units (After Expansion) = 15
,00010,50= 70,000 units
At 80,000 units (After Expansion) = 11.42
10,80,000= 94,571 units approx
Break Even Point (Value) = p.u. Price Sellingp.u. onContributi
Cost Fixed
At 50,000 units (Before Expansion) = 4015
6,90,000 = ₹ 18,40,000
At 80,000 units (After Expansion) = 4015
10,50,000 = ₹ 28,00,000
At 1,00,000 units (After Expansion) = 3611.42
10,80,000 = ₹ 34,04,553 approx.
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / BUDGET & BUDGETARY CONTROL
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Solution to Q. 9
WN 4: Selling Overheads
Units
sold
Variable cost
(₹ 20 p.u.)
Fixed Cost Total Cost
5,100 1,02,000 77,000 1,79,000
4,800 96,000 77,000 1,73,000
Variable Cost p.u. = 300
000,6
4,800 - 5,100
1,73,000 - 1,79,000 = ₹ 20
Applicable rate for next quarter:
Variable = ₹ 20
Fixed = 77,000 + 25% = ₹ 96,250
Now,
i) Flexible budget for next quarter at 5,500, 6,600 & 6,500 units levels.
Particulars 5,500 units 6,000 units 6,500 units
I) Sales 5,22,500 5,70,000 6,05,150
II) Total Cost
a) Direct Material
A – (Units ₹ 12) 66,000 72,000 78,000
B – (Units ₹ 11) 60,500 66,000 71,500
b) Manufacturing Wages
Variable NR (5,500 units 20.25) 1,11,375 1,11,375 1,11,375
OR - 15,188 30,375
Fixed 57,915 57,915 57,915
c) Factory Overhead
Variable (Units ₹ 3) 16,500 18,000 19,500
Fixed 83,400 83,400 83,400
d) Selling Overhead
Variable (Units ₹ 20) 1,10,000 1,20,000 1,30,000
Fixed 96,250 96,250 96,250
Total Cost 6,01,940 6,40,128 6,78,315
III) Profit/(Loss) (I – II) (79,440) (70,128) (73,165)
ii) Statement showing the lowest price to be quoted for Government Order for 2,000 units.
Particulars Amt. (₹)
Direct Material
A 12
B 11
Manufacturing Wages 30.375
Factory Overheads 3
Selling Overheads 20
Total Cost 84 76.375
Profit 16 14.55
Sales 100 90.925
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / BUDGET & BUDGETARY CONTROL
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Note: For deciding above selling price only variable cost are considered because this being an additional order, “additional fixed cost” will not be incurred.
Solution to Q. 10
Flexible budget showing the profit under optimistic as well as pessimistic assumption
(₹ in lakhs)
Particulars Optimistic Pessimistic
I) Existing Business
Contribution (400 30% 120 120
(-) Fixed Cost (45) (45)
Profit 75 75
II) Contract A
A) Contract Price 30 30
B) Total Cost
- Variable Cost (O = 30 60%)
(P = 30 60%) + 10%
18
19.8
- Fixed Cost [P = 4 + 10%] 4 4.4
22 24.2
C) Profit (A – B) 8 5.8
III) Contract B
A) Contract Price 20 -
B) Total Cost
- Variable Cost [50% of 20) 10 -
- Fixed Cost 3 -
C) Profit (A – B) 13 -
7 -
IV) New Product
A) Sales (O = 6 9)
(P = 6 3)
54
18
B) Total Cost
- Variable Cost (O = 50% of 54)
(P = (50% of 18) + 10%
27
9.9
- Fixed Cost (O = 1 9)
(P = (1 3) + 10%
9
3.3
36 13.2
C) Profit (A – B) 18 4.8
Total Profit (I + II + III + IV) 108 85.6
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / BUDGET & BUDGETARY CONTROL
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Solution to Q. 11
1) Calculation of Budgeted contribution per unit for the revised budget
Particulars Amount
Profit desired 25,000
(+) Budgeted Fixed Cost (1,40,000 + 28,500) 1,68,500
Total Budgeted Contribution 1,93,500
Budgeted Contribution per unit (1,93,500/12,000) 16.125
2) Calculation of the labour hour required per unit as per the revised budget
Particulars Amount
Selling Price per unit 32
(-) Contribution per unit (WN 1) (16.125)
Variable Cost per unit 15.875
(-) Material Cost per unit (8)
Labour & Variable OHs per unit 7.875
Labour & Variable OHs per hour (4 + 0.50) 4.50
Budgeted Labour hour required = hour per OHs Labour
unit per OHs Labour
= 4.50
7.875= 1.75 hours
Revised Budget for the next year
Particulars Amount
Production & Sales 12,000
Price per unit 32
Variable Cost p.u.
- Direct Material 8
- Direct Labour (1.75 hours 4) 7
- Variable OHs (1.7 hours 0.5) 0.875 15.875
Contribution per unit 16.125
Budgeted Contribution 1,93,500
Budgeted Fixed Cost (1,40,000 + 28,500) 1,68,500
Budgeted Profit 25,000
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / BUDGET & BUDGETARY CONTROL
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Solution to Q. 12
Cash Budget for 3 months January to March
Particulars January February March
Opening Balance 20,000 23,025 11,225
Add: Receipts
Cash Sales (10% of Sale) 4,000 5,000 6,000
Collection from Debtors (WN 1) 50,625 46,350 41,400
Total Cash Available 74,625 74,375 58,625
Less: Payments
Cash Purchases (10% of Purchases) 3,000 2,000 1,000
Payment to Creditors (WN 2) 12,600 21,150 21,600
Wages (WN 3) 21,000 22,000 23,000
Other Expenses 15,000 15,000 15,000
Purchase of Plant - 2,500 2,500
Installation Charges - 500 -
Closing Balance/Bank OD 23,025 11,225 - 4,475
Working Note:
1) Collection from Debtors
Particulars Nov. Dec. Jan. Feb. Mar.
Credit Sales (90% of Sales) 45,000 54,000 36,000 45,000 54,000
Collection in 1 month (50%) 22,500 27,000 18,000 22,500
Collection in 2 months (50% 22,500 27,000 18,000
(+) Penalty on collection in 2 months (5%) 1,125 1,350 900
50,625 46,350 41,400
2) Payment to Creditors
Particulars Nov. Dec. Jan. Feb. Mar.
Credit Purchases (90% of Purchases) 9,000 18,000 27,000 18,000 9,000
50% Payment (in 1 month) 4,500 9,000 13,500 9,000
Less: Cash Discount on
10% Payment in 1 month 450 900 1,350 900
50% Payment in 2 months 4,500 9,000 13,500
12,600 21,150 21,600
3) Wages
Particulars Dec. Jan. Feb. Mar.
Wages 20,000 22,000 22,000 24,000
(1/2) Payment in same month 10,000 11,000 11,000 12,000
(1/2) Payment in next month 10,000 11,000 11,000
10,000 21,000 22,000 23,000
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / BUDGET & BUDGETARY CONTROL
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Solution to Q. 13 M/s __________________
Cash Budget for the months January to March
Particulars January February March
Opening Balance 60,000 1,50,100 1,50,100
Add: Receipts
Cash Sales (20% of Sales) 24,000 22,000 30,000
Collection from Debtors (WN 1) 1,68,000 1,32,800 1,08,000
Sale of Debentures 40,000 - -
Total Cash Available 2,92,000 3,04,900 2,88,100
Less: Payments
Payment to Creditors (WN 2) 1,35,000 66,000 58,500
Wages & Salaries 24,000 24,000 24,000
Miscellaneous Expenses 21,000 30,000 24,000
Balance 1,12,000 1,84,900 1,82,960
Add: Loan Taken * 90,000 - -
Less: Interest Paid (1%) - 900 - 390 - 50
Balance 2,01,100 1,84,510 -
Less: Loan Repaid 51,000 34,000 5,000
Closing Balance 1,50,100 1,50,510 1,76,960
Loan Balance 39,000 5,000 -
Working Note:
1) Collection from Debtors
Particulars Oct. Nov. Dec. Jan. Feb. Marc.
Credit Sales (80% of Sales) 1,60,000 1,60,000 1,76,000 96,000 88,000 12,000
Collection in 1 month (50%) 80,000 80,000 88,000 48,000 44,000
Collection in 2 months (30%) 4,80,000 48,000 52,800 28,800
Collection in 3 months (20%) 32,000 32,000 35,200
1,68,000 1,32,800 1,08,000
2) Payment to Creditors
Particulars Nov. Dec. Jan. Feb. Mar.
Cost of goods sold (75% of sale) 1,50,000 1,65,000 90,000 82,500 1,12,500
Less: Wages & Salaries - 30,000 - 30,000 - 24,000 - 24,000 - 24,000
Raw material consumed 1,20,000 1,35,000 66,000 58,500 88,500
Raw material purchases
(1 month in advance) 1,35,000 66,000 58,500 88,500 ?
Payment to Creditors
(2 months credit) 1,35,000 66,000 58,500
Notes:
1) Sales for month of October is not given in the question and hence it is assumed to be a sale as that of November.
2) It is assumed that loan will be repaid in multiples of ₹ 1,000. Since it is available also in multiples of 1,000.
3) It is assumed that loan will be taken on the 1st day of the month where shortfall arises and will
PRIME VISION / C.A. FINAL / ADVANCED MANAGEMENT ACCOUNTING / BUDGET & BUDGETARY CONTROL
15
be repaid on the last day of the month were surplus remain. Further, it is assumed that interest for the month will be paid on the last day of the same month.
4) On 1st day of January the balance is ₹ 60,000 and the company wants to increases the minimum balance to ₹ 1,50,000 from 1st of January itself. In that case, to cover up shortfall, it becomes necessary that a loan of ₹ 90,000 be taken on 1st of January.
Solution to Q. 14
M/s Melodies Pvt. Ltd.
a) Cash Budget for 3 months January to March 2017
Particulars January February March
Opening Balance 35,000 (9,100) (12,600)
(+) Receipts
Cash Sales 5,000 6,000 8,000
Collection from Debtors 15,000 18,000 20,000
Total Cash Available 55,000 14,900 15,400
(-) Payments
Payment to Creditors 40,000 23,000 27,000
Purchase of Equipment (30,000 – 14,000) 16,000 - -
Wages 3,000 3,000 3,000
Payment of Dividend - - 15,000
Administration 1,500 1,500 1,500
Rent 3,600 - -
Closing Balance/(O.D.) (9,100) (12,600) (31,100)
b) Income Statement for 3 months ended 31st ,March 2017
Particulars Amount
I. Total Sales (Credit Sales + Cash Sales) 82,000
II. Gross Profit (25% of 82,000) 20,500
III. Further Expenses
Administration (1,500 3) 4,500
Rent (3,600 12 3) 900
Depreciation of Equipment (30,000 10% 3/12) 750
6,150
IV. Net Profit before Loss on Sales of Equipment (II – III) 14,350
V. Loss on Sale of Equipment (15,000 – 14,000) 1,000
VI. Net Profit (IV – V) 13,350
Recommended