C.A. FINAL BUDGET BUDGETARY CONTROL - Prime ...primevisionclasses.in/wp-content/uploads/2017/03/Budget...1 C.A. FINAL BUDGET & BUDGETARY CONTROL Solution to Q. 1 (i) Statement of the

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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


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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


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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


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


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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


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


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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


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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:


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*


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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


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


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


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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.


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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.


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


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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


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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


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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


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


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Solution to Q. 13 M/s __________________

Cash Budget for the months January to 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


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


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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


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

Documents

C.A. FINAL BUDGET BUDGETARY CONTROL - Prime ...primevisionclasses.in/wp-content/uploads/2017/03/Budget...1 C.A. FINAL BUDGET & BUDGETARY CONTROL Solution to Q. 1 (i) Statement of the