SOLUTION: Q. 4 – HS Ltd.

Budgeted Cash Flow statement for year ended 20x1

Total cash inflows ʹ000
Issue of share capital + 90
Loan received + 60
Cash collected from customers (180 + 100) + 280
= Total cash inflows 430
Total cash outflows
Purchase of fixed assets (Property, plant and equipment) (100)
Rent (30)
Payment of wages (101)
Payment of interest (4)
Payment to suppliers for stationery (8)
Repayment of loan (15)
= Total cash outflows (258)
Closing cash balance (in funds) 172

Budgeted Income Statement for year ended 20x1

Revenue ʹ000 ʹ000
350
Expenses:
Rent 30
Salaries 101
Interest 4
Stationery 8.5
Depreciation of fixed assets 5 (148.5)
Net profit before taxation 201.5
Taxation payable on profits for year (10)
Profit (after tax) for year 191.5

Budgeted Balance Sheet as at 31 December 20x1

Current assets: ʹ000
Cash/Bank 172
Accounts receivable (debtors) 70
Total current assets 242
Fixed assets:
Equipment at book value 120
Total assets 362
Financed by:
Current liabilities:
Loan payable (loan creditors) 45
Taxation payable 10
Accounts payable (25 + .5) 25.5
80.5
Ordinary share capital issued 90
Retained earnings (Reserves) 191.5

Total liabilities and shareholders’ funds 362

Advantages – see notes p.89.

 Solution 5– PRODUCT OMEGA

Production Budget
Units
Budgeted sales of Omega 60,000
Budgeted closing inventory 4,000
Total requirement 64,000
Less budgeted opening inventory (3,000)
Production requirement 61,000

Raw Materials Purchases Budget Kgs.

Required for production (61,000 x 3 kgs.) 183,000
Budgeted closing inventory 7,000
Total requirement 190,000
Less budgeted opening inventory (15,000)
Purchase Requirement 175,000
 SOLUTION: Q. 6 – ARKAN LTD.
Workings
Production Budget
Sales 40,000 units
+ Closing Stock 2,000 units
Production Requirement 42,000 units

Product cost per unit (VC):

Material €2.00
Labour €4.50
Overhead €0.50
€7.00

Cash Budget
Cash inflows:
Sales (5/6 x
€666,667
€800,000)
Share issue 200,000
€866,667
Cash outflows:
Fixed assets 100,000
Light and heat 8,000
Administratio
22,000
n
Rend rates 25,000
Selling expenses 70,000
Purchases* 91,000
Labour 189,000
Variable overhead 21,000 526,000

Closing cash 340,667

balance

*Purchases of
material:
=
42,000 x €2
€84,000
+ Closing stock 7,000
€91,000
Budgeted Trading, Profit and Loss Account for y/e 31/12/2009

Sales (40,000 x €20) €800,000

-Cost of sales:
Opening stock -
Production cost (42,000 x €7) 294,000
294,000
-Closing stock (2,000 x €7) 14,000 280,000
Gross profit: 520,000
Less expenses:
Depreciation 10,000
Light and heat 8,000
Administration 22,000
Rent and rates 25,000
Selling expenses 70,000 135,000
Net profit €385,000

Budgeted Balance Sheet as at 31/12/2009

Acc.
Fixed assets Cost N.B.V
Dep
Sundry fixed assets €100,000 €10,000 €90,000

Current assets:
Raw materials 7,000
Finished goods 14,000
Debtors 133,333
Bank 340,667
495,000

Current liabilities -
€585,000
Financed by:
Share capital 200,000
Profit and Loss a/c 385,000
€585,000
SOLUTION: Q. 7 – Milton Co.

SALES BUDGET
Units Price Total
€ Sales
MAY 10,000 30 300,000
JUNE 8,000 30 240,000
JULY 10,000 30 300,000
AUGUST 12,000 30 360,000

RECEIPTS SCHEDULE 75%: 25%

JUNE JULY AUGUST
MAY sales 75,000 - -
JUNE sales 180,000 60,000 -
JULY sales - 225,000 75,000
AUGUST sales - - 270,000
255,000 285,000 345,000

PRODUCTION BUDGET
MAY JUNE JULY AUGUST SEPT.
Sales(units) 10,000 8,000 10,000 12,000 14,000
Plus closing
stock 4,000 5,000 6,000 7,000 7,000
Less opening
stock 5,000 4,000 5,000 6,000 7,000
9,000 9,000 11,000 13,000 14,000

MATERIALS USAGE & PURCHASES BUDGET Quantity: 4 kg

MAY JUNE JULY AUGUST SEPT.
Usage 36,000 36,000 44,000 52,000 56,000
Plus closing
stock 36,000 44,000 52,000 56,000
Less opening
stock 36,000 36,000 44,000 52,000
36,000 kg 44,000 kg 52,000 kg 56,000 kg

Price €2 per kg €72,000 €88,000 €104,000 €112,000

Paid JUNE JULY AUGUST SEPT.
CONTINUED

LABOUR UTILISATION BUDGET

JUNE JULY AUGUST
Production units 9,000 11,000 13,000
Labour hours 2hrs 18,000 22,000 26,000
Labour cost € 6 108,000 132,000 156,000

SALES COMMISSIONS
MAY JUNE JULY AUGUST
Sales 300,000 240,000 300,000 360,000
2% of sales 6,000 4,800 6,000 7,200

VARIABLE MANU. OVERHEADS

JUNE JULY AUGUST
Production units 9,000 11,000 13,000
Overhead rate € 2 18,000 22,000 26,000

FIXED OVERHEADS
Total 2,800
Less: Depreciation 800
Payable 2,000
 CASH BUDGET
JUNE JULY AUGUST TOTAL

CASH INFLOWS:

Receipts schedule 255,000 285,000 345,000 885,000

CASH OUTFLOWS:

Credit Purchases 72,000 88,000 104,000 264,000

Labour cost 108,000 132,000 156,000 396,000
Sales commissions 6,000 4,800 6,000 16,800
Var. Manu O/H 18,000 22,000 26,000 66,000
Fixed overheads 2,000 2,000 2,000 6,000
Fixed S & A 4,000 4,000 4,000 12,000
Rates - - 5,000 5,000
Equipment - - 45,000 45,000
210,000 252,800 348,000 810,800

NET CASH FLOW 45,000 32,200 (3,000) 74,200

OPENING BALANCE (8,000) 37,000 69,200 (8,000)

CLOSING BALANCE 37,000 69,200 66,200 66,200

Solution Q8 Pearce Ltd.

Sales Budget
Price
Units p.u. Sales €
June 15,000 €30 450,000
July 18,000 €30 540,000
August 20,000 €30 600,000
Sept 17,000 €30 510,000
Oct 12,000 €30 360,000

RECEIPTS SCH. 20% : 80%

June July August

May – prior period 384,000
June 90,000 360,000
July 108,000 432,000
August 120,000
474,000 468,000 552,000

Production Budget
June July Aug. Sept. Oct.

Sales in units 15,000 18,000 20,000 17,000 12,000

Plus Closing Inv. 7,200 8,000 6,800 4,800
Less Opening Inv. 6,000 7,200 8,000 6,800
= Production 16,200 18,800 18,800 15,000

Usage - 4 kg per unit 64,800 75,200 75,200 60,000

Purchases Budget
June July Aug. Sept.

Usage 64,800 75,200 75,200 60,000

Plus Closing Inv. 37,600 37,600 30,000

Less Opening Inv. 32,400 37,600 37,600

70,000 75,200 67,600

Price per kg €3 210,000 225,600 202,800

Labour Utilisation Budget

May 130,000
June 120,000
July 130,000
August 140,000

PAYMENTS SCHEDULE 75% : 25%

June July Aug.
May 32,500
June 90,000 30,000
July 97,500 32,500
August 105,000
122,500 127,500 137,500

Overheads May June July Aug.

Total 88,000 85,500 92,500 90,000
Less depreciation 25,500 25,500 25,500 25,500
62,500 60,000 67,000 64,500
Paid in June Paid in July Paid in Aug
Cash budget for 3 months ending 31st August
June July Aug Total

Receipts 474,000 468,000 552,000 1,494,000

Payments:
Purchases 210,000 225,600 202,800 638,400
Wages 122,500 127,500 137,500 387,500
Overheads 62,500 60,000 67,000 189,500
Tax 0 45,000 0 45,000
Machine 0 60,000 0 60,000

Total Payments 395,000 518,100 407,300 1,320,400

Net Cash Flow 79,000 (50,100) 144,700 173,600

Opening Bank Bal (32,000) 47,000 (3,100) (32,000)

Closing Bank Bal 47,000 (3,100) 141,600 €141,600

Solution Q9 Fern Ltd

Sales Budget
Product A Product B Total
Units 10,000 5,000
Selling price p u €100 €80
Sales Revenue €1,000,000 €400,000 €1,400,000

Production Budget
Product A Product B
Sales in units 10,000 5,000
Plus Closing Inv. 250 200
Minus Opening Inv. 500 400
= Production 9,750 4,800

Product A Product B

Usage Plastic per unit 4 kg 3 kg

Total Plastic Usage 39,000 14,400 = 53,400 kg

Usage Cloth per unit 5 metres 8 metres

Total Cloth Usage 48,750 38,400 = 87,150 metres

Purchases Budget
Plastic Cloth
Usage 53,400 87,150
Plus Closing Inv. 20,000 11,250
Minus Opening Inv. 16,000 9,000
57,400 Kg 89,400 Metres

Price per kg / per metre €5 €2

Purchases cost €287,000 €178,800
Labour Utilisation Budget (Production X Labour hours X cost per hour)
Labour
Production hrs Labour rate Total cost
Product A 9,750 3 €12 €351,000

Product B 4,800 2 €12 €115,200

Variable Overhead Budget (Production X Labour hours X o/h rate per hour)
Labour Variable o/h
Production hrs rate Total cost
Product A 9,750 3 €2 €58,500

Product B 4,800 2 €2 €19,200

Contibution per unit

Product A Product B
Selling price p u €100 €80
LESS Variable cost per
unit:
Direct materials 30 31
Direct Labour 36 24
Variable overhead 6 4
Contribution per unit 28 21
SOLUTION: Q.10 – Ortega Compnay.

1. SALES BUDGET
Arrows Spears Total
Forecast sales units 30,000 20,000
Projected price 70 100
Forecast sales (€) 2,100,000 2,000,000 4,100,000

2. PRODUCTION BUDGET
Arrows Spears
Sales 30,000 20,000
Target closing stock 15,000 6,000
45,000 26,000
Opening stock (10,000) (5,000)
Required production 35,000 21,000

3. MATERIALS PURCHASES BUDGET

A B C
Production Arrows 140,000 70,000
Spears 105,000 63,000 21,000
245,000 133,000 21,000
Target closing stock 20,000 17,000 3,000
265,000 150,000 24,000
Opening stock (15,000) (14,000) (2,000)
Required purchases 250,000 136,000 22,000
Price per unit €7.00 €5.00 €2.50
Budgeted purchases 1,750,000 680,000 55,000
Total 2,485,000

4. DIRECT LABOUR BUDGET

Arrows Spears Total
Budgeted production 35,000 21,000
Hours per unit 2 3
Required hours 70,000 63,000
Rate per hour €3 €4
Budgeted labour cost 210,000 252,000 462,000

5. BUDGETED FINISHED GOODS STOCK

Arrows Spears
Material A 28.00 35.00
Bottle B 10.00 15.00
Bottling cost C 0.00 2.50
38.00 52.50
Direct labour 6.00 12.00
Overhead 4.00 6.00
48.00 70.50

Target Stock 15,000 6,000

720,000 423,000 1,143,000
Solution 11 Raw ltd.
(A)
(i) Sales Budget in €

January February March

Sales units (500ml bottles)
55,000 53,000 57,500
Sales value (@ €1.90 per bottle)
104,500 100,700 109,250

Total sales unit 165,500

Total sales € 314,450

(i) Production Budget in units (500ml bottles)

January February March
Sales
55,000 53,000 57,500
Closing Inventory
5,000 5,000 5,000

60,000 58,000 62,500

Less opening Inventory
2,000 5,000 5,000
Production required in bottles
58,000 53,000 57,500
Production required in litres
29,000 26,500 28,750

(ii) Materials Purchase Budget

Each 500ml bottle contains 450ml or 90% spring water and 50ml or 10% juice blend
Spring water January February March

Production in litres
29,000 26,500 28,750
Spring water required per 500ml bottle i.e 90%
26,100 23,850 25,875
Closing Inventory
2,000 2,000 2,000
Less opening Inventory
2,000 2,000 2,000
Purchases required
26,100 23,850 25,875
Total cost @ €0.20
5,220 4,770 5,175

Juice Blend
Production in litres
29,000 26,500 28,750
Juice Blend required per 500ml bottle i.e 10%
2,900 2,650 2,875
Closing Inventory
500 500 500
Less opening Inventory
500 500 500
Purchases required
2,900 2,650 2,875
Total cost @ €1.00 per litre
2,900 2,650 2,875

Plastic bottles January February March

Production in 500ml bottles
58,000 53,000 57,500
Closing Inventory
5,000 5,000 5,000

60,000 58,000 62,500

Less opening Inventory
5,000 5,000 5,000
Purchases required
58,000 53,000 57,500
Total Cost @ €0.06 per bottle
3,480 3,180 3,450

Note: For each of the ingredients the opening inventories and closing inventories are the same,
hence, the above calculations may be computed by excluding these and just using production
quantities.

(iii) Labour cost budget

January February March

Production in 500ml bottles 58,000 53,000 57,500

Cost to produce each bottle 0.4 0.4 0.4

Production labour cost 23,200 21,200 23,000

Total production labour cost 67,400

Labour hours 0.05 2900 2650 2875

(B) Budgeted Gross Profit

€

Sales 314,450
 Cost of Sales (165,500 bottles *.71) 117,505

Gross Profit 196,945

(C) Explain the term 'flexible budget'

A flexible budget is a budget which, by recognising the difference in behaviour between variable and
fixed overheads in relation to changes in volume, turnover or other variable factors, is designed to
change in accordance with such fluctuations (or similar).

(D) Briefly discuss the advantages of preparing a flexible budget.

Flexible budgets take into account the fact that, when production increases or decreases, variable costs
change. Fixed costs, however, stay the same. This allows for a more appropriate analysis of managerial
performance.

When using a flexible budget to evaluate the performance of a production manager, for example, the
variable costs are adjusted to the actual level of units produced. The fixed costs stay at the same level
as a static budget, because they are not expected to change when production increases or decreases.
Comparison of actual overhead costs with the overhead costs in a flexible budget is, potentially, more
revealing about the manager’s ability to control costs as we are comparing like with like (or similar).
SOLUTION: Q.12 – TARGET SALES COMPANY

TARGET SALES COMPANY

Cash Forecast for 6 months ended September.

Apr. May June July Aug Sept

Cash Inflow
Cash Sales 30 35 50 20 30 40
Debtors 180 225 270 315 450 180
Sale of Asset ___ ___ 120 ___ ___ ___
210 260 440 335 480 220

Cash Outflow
Creditors 280 400 450 300 400 200
Wages 20 20 20 30 20 20
General Expenses 10 10 10 10 10 10
310 430 480 340 430 230

Net Cash Flow (100) (170) ( 40) ( 5) 50 ( 10)

Opening Balance ( 25) (125) (295) (335) (340) (290)
Closing Cash (125) (295) (335) (340) (290) (300)
SOLUTION: Q.13 – LANSDOWNE COMPANY.
(a)

Cash budget for 3 months ending 30th September, 2009.

July August September

€ € €
Receipts (W1) 352,000 368,000 448,000
Payments:
Suppliers(W2) 96,000 112,000 112,000
Wages (W3) 84,000 98,000 98,000
Var.Man.Overhead 36,000 42,000 42,000
Fixed Man.Overhead 1,600 1,600 1,600
Selling & Admin. 2,000 2,000 2,000
Sales Comm.(W4) 9,600 12,000 14,400
Dividends - 7,000 -
Capital Exp. __ - _30,000 __ -
Total Payments 229,200 304,600 270,000
Net Cash Flow +122,800 +63,400 +178,000
Opening Bank Balance (200,000) (77,200) (13,800)
Closing Bank Balance (77,200) (13,800) €164,200

W1 – Collections from debtors

July (60% x €320,000) - June = €192,000

(40% x €400,000) - May = €160,000
€352,000

Aug. (60% x €400,000) - July = €240,000

(40% x €320,000) - June = €128,000
€368,000

Sept. (60% x €480,000) - Aug. = €288,000

(40% x €400,000) - July = €160,000
€448,000

W2 – Payments to Suppliers

Materials Purchase Budget.

June July Aug. Sept. Oct.
Production Req. (kgs.) 20,000 24,000 28,000 28,000 24,000
+ Closing Inv. 24,000 28,000 28,000
Total Needs 44,000 52,000 56,000
-Opening Inv. 20,000 24,000 28,000
Purchase Req. 24,000 28,000 28,000
Price per kg. €4 €4 €4
Total (€) €96,000 €112,000 €112,000
Paid in July Paid in Aug. Paid in Sept.
SOLUTION: Q 13 – LANSDOWNE CO. Cont’d.

W3 Wages Budget

Production X Labour Cost P.U.

July 12,000 x €7 = €84,000
Aug. 14,000 x €7 = €98,000
Sept. 14,000 x €7 = €98,000

W4 Sales Commission.

June Sales €320,000 x 3% = € 9,600 (paid July)

July Sales €400,000 x 3% = €12,000 (paid Aug.)
Aug. Sales €480,000 x 3% = €14,400 (paid Sept.)

(b)
The cash budget is one of the most important planning tools that an organisation can use. It shows the
cash effect of all plans made within the budgetary process. If it discloses that there will be insufficient
cash resources to finance the planned operations, then the budget may be modified or borrowing
facilities arranged with the bank in advance of requirements.

The following situations can arise in a cash budget:

Cash position Appropriate management action.

Short-term surplus (a) Pay creditors early and obtain a discount

(b) Make short-term investments.

Short-term deficit (a) Increase creditors

(b) Arrange an overdraft

Long-term surplus (a) Make long-term investments

(b) Replace/update fixed assets

Long-term deficit (a) Raise long-term finance

(b) Consider disinvestment opportunities
SOLUTION: Q.14 – MARS LTD.

(a) RECEIPTS
Apr. May Jun July
Sales 200,000 300,000 240,000
less: cash sales 40,000 60,000 48,000
Credit sales 160,000 240,000 192,000
Less closing debtors 120,000 180,000 144,000
40,000 60,000 48,000
Add: opening debtors 60,000 120,000 180,000
100,000 180,000 228,000
Cash sales 40,000 60,000 48,000
Receipts 140,000 240,000 276,000

PURCHASES BUDGET

Cost of sales 150,000 225,000 186,000 150,00

0
Target closing stock 75,000 62,000 50,000
225,000 287,000 236,000
Opening stock 55,000 75,000 62,000
Purchases 170,000 212,000 174,000
Paid May Jun

EXPENSES PAYMENTS

Expenses 40,000 45,000 35,000

Depreciation (5,000) (5,000) (5,000)
Paid 35,000 40,000 30,000
Less 1/5 7,000 8,000 6,000
28,000 32,000 24,000
Previous month 3,000 7,000 8,000
31,000 39,000 32,000

CASH BUDGET

Receipts from sales 140,000 240,000 276,000

Payments to suppliers 150,000 170,000 212,000
Expenses 31,000 39,000 32,000
Purchase of fixed assets ______ 25,000 ______
181,000 234,000 244,000
Net cash flow (41,000) 6,000 32,000
Opening bank balance 5,000 (36,000) (30,000)
Closing bank balance (36,000) (30,000) 2,000

(b) For class discussion

SOLUTION: Q.15 – A. SEER

(a)
RECEIPTS FROM DEBTORS

Oct Nov Dec

Sales 80,000 120,000 60,000
less closing debtors (40,000) (60,000) (30,000)
40,000 60,000 30,000
add: opening debtors 30,000 40,000 60,000
Receipts 70,000 100,000 90,000

Cost of sales = Opening stock + purchases – closing stock.

Purchases = Cost of sales + closing stock – opening stock

PURCHASES BUDGET

Oct Nov Dec Jan

Cost of sales 60,000 90,000 45,000 60,000
Target stock 45,000 22,500 30,000
105,000 112,500 75,000
Opening stock (34,000) (45,000) (22,500)
Purchases 71,000 67,500 52,500
Paid Nov Dec Jan

EXPENSES PAYMENTS

Oct Nov Dec

Expenses 16,000 18,000 15,000
Depreciation (2,000) (2,000) (2,000)
Paid 14,000 16,000 13,000

CASH BUDGET

Oct Nov Dec

Balance b/f 2,000 38,000 51,000
Receipts from sales 70,000 100,000 90,000
72,000 138,000 141,000

Payments to suppliers 20,000 71,000 67,500

Expenses 14,000 16,000 13,000
Purchase of fixed assets _____ _____ 10,000
34,000 87,000 90,500
Balance c/f 38,000 51,000 50,500

(b) For class discussion.

 SOLUTION: Q.16 - KILMAINHAM LTD.

SALES BUDGET
Jun July Aug Sep
Quantity 4.0 6.0 8.0 5.0
Price €30 €30 €30 €30
Sales value 120.0 180.0 240.0 150.0
Received Jul Aug Sep Oct
PRODUCTION BUDGET
Jun Jul Aug Sep
Sales 4.0 6.0 8.0 5.0
Target stock 3.0 4.0 2.5 2.0
7.0 10.0 10.5 7.0
Opening stock (2.0) (3.0) (4.0) (2.5)
Production 5.0 7.0 6.5 4.5
PURCHASES BUDGET
Jun Jul Aug Sep
Production 5.0 7.0 6.5 4.5
Quantity p.u. 16.0 16.0 16.0 16.0
Production usage 80.0 112.0 104.0 72.0
Target stock 164.0 140.0 112.0 136.0
244.0 252.0 216.0 208.0
Opening stock (136.0) (164.0) (140.0) (112.0)
Purchases kgs. 108.0 88.0 76.0 96.0
Price p.kg. €0.50 €0.50 €0.50 €0.50
Purchases 54.0 44.0 38.0 48.0
Paid Jul Aug Sep Oct
WAGE PAYMENTS
Jun Jul Aug Sep
Production 5.0 7.0 6.5 4.5
Cost p.u. €12 €12 €12 €12
Wages expense 60.0 84.0 78.0 54.0
1/6 10.0 14.0 13.0 9.0
Paid current month 70.0 65.0 45.0
From last month 10.0 14.0 13.0
80.0 79.0 58.0
OVERHEAD PAYMENTS
Jul Aug Sep
Production 7.0 6.5 4.5
Variable p.u. €6 €6 €6
Variable overhead 42.0 39.0 27.0
Fixed overheads 19.0 19.0 19.0
Selling expenses 8.0 8.0 8.0
69.0 66.0 54.0
Depreciation (9.0) (9.0) (9.0)
Rent (1.0) (1.0) (1.0)
Paid 59.0 56.0 44.0

CASH BUDGET Jul Aug Sep

Balance b/f 1.0 (75.0) (74.0)
Receipts from sales 120.0 180.0 240.0
121.0 105.0 166.0
Payments to suppliers 54.0 44.0 38.0
Wages 80.0 79.0 58.0
Overheads 59.0 56.0 44.0
Rent 3.0
Purchase of machine ____ ____ 24.0
196.0 179.0 164.0

Balance c/f (75.0) (74.0) 2.0

Solution Q17 Autoengineering Ltd.
Part A
(Production Budget - Component
Jan Feb March
XY
Required closing stock (40% of
480 440 520
following month's sales)
Current month's sales 1,000 1,200 1,100
Total requirement 1480 1640 1620
Opening Stock -400 -480 -440
Volume to be produced 1080 1160 1180

W1 Material Usage - Material 1 Jan Feb March Total

Component XY - month's production
volume @ 2kg per unit 2,160 2,320 2,360

Material Usage - Material 2

Component XY - month's production
volume @ 4kg per unit 4,320 4,640 4,720

Part B Jan Feb March Total

(c) Material Purchase Budget - Material 1
Current month's production
requirement 2,160 2,320 2,360
375 400 475
Required closing stock
2535 2720 2835
Opening stock -360 -375 -400
Material Purchases in kg - Material 1 2175 2345 2435
Material Purchases in € - Material 1
@ €12 per kg 26100 28140 29220 83460

Material Purchase Budget - Material 2

Current month's production
requirement 4,320 4,640 4,720
Required closing stock 825 920 960
5145 5560 5680
Opening stock 760 825 920
Material Purchases in kg 4385 4735 4760
Material Purchases in € - Material 2
@ €14 per kg 61390 66290 66640 194320
PART C

Part C Jan Feb March Total

Receipts
Component XY 194,000 300000 360000 854000
Payments
Purchases 118,000 87490 94430 299,920
Fixed Production 37,000 37,000 37,000 111,000
overheads
Labour 20520 22040 22420 64,980
Variable selling exp 12000 14400 13200 39600
Dividends 50,000 50,000
machinery -
Net receipts/(payments) 6,480 89,070 192,950
Opening bank balance 12,000 18,480 107,550
Closing bank balance 18,480 107,550 300,500
Format and Presentation

Workings
Calculation of Sales Revenue & Cash Receipts - Component XY

Component XY - Sales 1,000 1,200 1,100

Volume
Budgeted sales price 300 300 300
Budgeted sales revenue 300000 360000 330000
Sales receipts - One 194,000 300000 360000
month’s credit

Part D
Uncertainty can be incorporated into a budgeting process by using a variety of modern budgeting
techniques. For example, an increasing number of companies prepare continuous (rolling) budgets. A
continuous budget is a budget system that has in effect a budget for a set number of months, quarters
or years at all times. Thus, as a month or quarter ends, the original budget is updated based on the
newly available information, and the budget for a new month or quarter is added. Advances in
information technology and availability of easy-to-use budgeting and planning software facilitate the
continuous updating of budgets and have greatly increased the number of firms that use continuous
budgets. These companies no longer view their budgets as cast in stone at the start of a financial year
but as living documents they can revise on an on-going basis throughout the year. With continuous
budgets, managers are more likely to constantly scrutinise budgeted operations for the remainder of the
budget period and examine operations beyond the immediate future. Budgeting and planning are no
longer once a year events. Firms using continuous budgets are more likely than firms with a traditional
budgeting approach to have up-to-date budgets, because the preparation of a budget for a new quarter
or month often leads to revision of the existing budget. Other approaches to incorporating that can
incorporate uncertainty include zero based and beyond budgeting.
Q 18
Item 1 (a)

Cash Receipts from Sales in April

April
Cash sales 100000*10% 10,000
Less 10% discount 1,000
9,000

March
Credit Sales Recipts 80,000*60% 48,000

February
Credit Sales 120,000*20% 24,000

January
Credit Sales Recipts 90,000*8% 7,200
88,200

Item 2 C
July August Sept
Sales units 8,000 10,000 12,000
Selling price per unit 30 30 30
240,000 300,000 360,000

Cash 60,000 75,000 90,000

Credit 180,000 225,000 270,000

Cash inflows 255,000 315,000

(Current months cash sales + credit sales from previous month)

Item 3 D
Sales units 8,000 10,000 12,000
Add Closing stock 2,500 3,000
Total stock needed 10,500 13,000
Less opening stock 2,000 2,500
Required production in units 8,500 10,500
Labour hours 2 2
Total hours 17,000 21,000
Total Wages
(hours*€6) 102,000 126,000