# FNSACC503 Manage Budgets and Forecasts Proof Reading Service

## Q1.

AJ Ltd provides the following information:

 Selling price \$10.00 per unit 100% Variable cost -\$7.00 per unit 70% Contribution Margin \$3.00 per unit 30% Total Fixed Cost \$300,000 per annum

Required:

( a )Calculate the sales breakeven in dollars: (show your workings)

( b )Prepare a projected Income Statement at a sales volume of 160,000 units:

 Projected Income Statement Sales volume 160,000 units Sales revenue \$1,600,000 Less: Variable costs \$1,120,000 Contribution Margin \$480,000 Less: Fixed costs \$300,000 Profit before Tax \$180,000

The following questions are based on the material in Chapter 2:

### Q2.

The following is a budget prepared by Jacob’s Gardening (on a cash accounting basis) for the 3 months ending 31 March.

 Jan Feb Mar Total Income Fees received \$80,000 \$90,000 \$100,000 \$270,000 Expenses Wages 10,000 11,000 12,000 33,000 Office expenses 4,000 4,200 4,800 13,000 Equipment expenses 2,200 2,400 2,600 7,200 Motor vehicle expenses 5,800 5,200 5,000 16,000 Advertising 8,000 9,000 10,000 27,000 Other 3,400 3,600 3,000 10,000 Total Expenses 33,400 35,400 37,400 106,200 Profit 46,600 54,600 62,600 163,800

The following assumptions are used to prepare the April budget by using the March figures:

1.Fees received are expected to fall by 10%

2.Wages will rise by 1%

3.All other expenses will rise by 5%

Required:

( a )Using the layout below, complete a budgeted Income Statement for April.

 March(Budgeted) ExpectedChange April(Budgeted) Receipts Fees received \$100,000 -10% \$90,000 Payments Wages \$12,000 +1% \$13,200 Office expenses \$4,800 +5% \$5,040 Equipment expenses \$2,600 +5% \$2,730 Motor vehicle expenses \$5,000 +5% \$5,250 Advertising \$10,000 +5% \$10,500 Other \$3,000 +5% \$3,150 Total Payments 37,400 +6.6% \$39,870 Profit \$62,600 -10% \$50,130

( b )Using the layout below, determine the closing cash projection for April if the opening balance of cash for January was overdrawn by \$25,010. Ignore the impact of GST.

 Cash Budget Cash balance at the start -\$25,010 Add: Receipts \$90,000 = Cash Available \$64,990 Less: Payments \$39,870 = Cash balance at the end \$25,120

The following questions are based on the material in Chapter 3:

### Q3.

Expected sales (in units) are as follows:

 January February March April May Sales (units) 10,000 11,000 12,000 13,000 14,000

Opening stock of finished goods is required to be 50% of that month’s expected sales.

Each unit produced requires 1kg of raw material at a cost of \$6 per kg.

Each month’s opening stock of raw material must be sufficient to satisfy that month’s production.

Required: Prepare a Material Purchases Budget in units and dollars for the months of January to March.

Production Budget (Units)

 January February March April May Sales (units) 10,000 11,000 12,000 13,000 14,000 Add: Closing Inventory 5,500 6,000 6.500 7,000 7,500 Less: Opening Inventory 5,000 5,500 6,000 6,500 7,000 = Production 10,500 11,500 12,500 13,500 14,500

Raw Material Purchases Budget (kg & \$)

 January February March April Usage (kg) 10,500 11,500 12,500 13,500 Add: Closing Inventory 11,500 12,500 13,500 14,500 Less: Opening Inventory 10,500 11,500 12,500 13,500 = Purchases (kg) 11,500 12,500 13,500 14,500 = Purchases (\$) 69,000 75,000 81,000 87,000

### Q4.

Amy’s Dolls Pty Ltd provides us with the following information concerning factory overhead.

 Department 1 Production 10,000 units Variable overhead \$1.00 per unit Fixed cost \$8,000 Department 2 Production 8,000 units Variable overhead \$1.20 per unit Fixed cost \$12,000

Required: Prepare a factory overhead budget for each department and in total.

 Department 1 Department 2 Total Budgeted Production (units) 10,000 8,000 Variable overhead per unit (\$) \$1 \$1.20 Variable overhead cost (\$) \$10,000 \$9,600 Fixed overhead (\$) \$8,000 \$12,000 Total overhead (\$) \$18,000 \$21,600 \$39,600

### Q5.

Booth manufactures football scarves.

Each unit has the following production requirements:

 \$ Material 1 metre @ \$10 per metre 10.00 Direct Labour 1 hour @ \$20 per hour 20.00 Manufacturing Overhead 100% of Direct Labour cost 20.00 Total per unit \$50.00

The production budget for the quarter to December is:

 October November December 1,000 units 2,000 units 3,000 units

Required: Prepare the cost of production and supporting budgets for the December quarter.

Booth – Cost of Production Budget

 Cost of Production Budget October November December Production (units) 1,000 2,000 3,000 Cost of production (\$) 50,000 100,000 150,000
 Materials Usage Budget October November December Material (metres) 1,000 2,000 3,000 Cost of material @\$10 per mt (\$) 10,000 20,000 30,000
 Labour Budget October November December Labour (hours) 1,000 2,000 3,000 Cost of labour @\$20 per DL hr (\$) 20,000 40,000 60,000
 Overhead Budget October November December OH Cost @100% of DL cost (\$) 20,000 40,000 60,000
 Total Production Costs October November December Total must be as per Cost of Production (\$) 50,000 100,000 150,000

The following questions are based on the material in Chapter 4:

### Q6.

The following information relates to the business of L & B Computers.

Actual Credit Sales amount to:

 March April May \$6,930 \$5,390 \$2,970

Customers normally pay their debts at the following rate:

1.80% in first month after sale               2. 20% in second month after sale

Estimated Credit Sales:

 June July August \$4,840 \$5,610 \$4,180

Required: Prepare an Accounts Receivable collections budget, for the months of June, July and August.

L&B Computers Accounts Receivable Collections Budget

 April May June July August Credit Sales \$ \$5,390 \$2,970 \$4,840 \$5,610 \$4,180 Collections: 1 month 2,376 3,872 4,488 2 months 594 968 Total Receipts \$ 2,376 4,466 5,456

### Q7.

The Speedy Sports Club is preparing its operating expense budget for the September quarter.

You are required to prepare a forecast of expenses paid each month, and for the quarter, using the data they provide.

Assume all cash expenses are paid for in the month they are incurred unless otherwise stated.

Round all amounts to the nearest dollar.

1.The club employs four full-time staff. The secretary-manager’s current salary is \$4,800 per month.

2.The other three full-time staff members are currently paid \$3,500 per month each. An enterprise agreement will increase all full-time salaries by 8% from 1st September.

3.Part-time staffs currently earn \$22 per hour. This is to increase by \$1.50 per hour from 1 August.

4.Estimated part time hours for the budget period are:

July                  = 380 hrs

August              = 320 hrs

September      = 410 hrs

5.Employee overheads (workers’ compensation etc) are 8.5% of salaries and wages.

6.Sporting trophies are expected to cost \$2,420 in July and \$1,600 in September.

7.The club pays \$340 per month for telephone and internet. Electricity and gas are billed every three months. The electricity and gas bill for the June quarter is estimated at \$1,100 and is due for payment in July.

8.Other operating expenses amount to \$6,400 per month.

9.Depreciation on sporting and recreation facilities is charged at 15% p.a. on cost of \$92,000. The monthly depreciation is included in the ‘Other operating expenses’ above.

 Full time staff Salary \$ % Increasefrom1/9 July \$ August \$ September \$ Quarter \$ Secretary-Manager 4,800 +8% 4,800 4,800 5,184 14,784 Fulltime staff (3) \$10,500 +8% 3,500 3,500 3,780 10,780 Cost of full time staff 8,300 8,300 8,964 25,564
 Part time staff July August September Quarter Hours 380 320 410 1,110 Rate (\$ per hour) 22 23.5 23.5 22.98 Cost of part time staff 8,360 7,520 9,635 25,515
 Total Full Time + Part Time July August Sept Quarter Totalwages and salaries 16,660 15,820 18,599 51,079 Employee overheads 1,416.1 1,344.7 1,580.92 4,341.72 Totallabour costs paid 18,076.1 171,64.7 20,179.92 55,420.72

Expenses Payable Budget

 July August September Quarter Labour costs 18,076.1 171,64.7 20,179.92 55,420.72 Trophies 2,420 - 1,600 4,020 Utilities 1,440 340 340 2,120 Other expenses * (exclude monthly deprecn.) 5,250 5,250 5,250 15,750 Totalexpenses paid 27,186.1 22,754.70 27,369.92 77,310.72

* Depreciation per month = 92,000*15%/12 = 1,150 (Castillo, 2015)

The following questions are based on the material in Chapter 5:

### Ridge and Roberts are partners in a small accounting firm. Income and expenses for the year ended 30 June 2015 were:

 Fees Income \$ 224,000 Marketing Expenses \$ 6,900 Other Income 52,000 Other Expenses 2,000 Office Wages 31,000 Insurance 8,800 Office Expenses 9,600 Rent 11,200

For the year ending 30 June 2016, budgets are to be based on the following:

1.Fees income is expected to rise by 9%.

2.Other income is expected to rise by 3%.

3.Office expenses, Office wages, and Other Expenses will rise by 2%.

4.Insurancewill rise by 6%.

5.Rent will rise by 3%.

6.Marketing expenses will rise by 7%.

Required:Prepare the Income Statement for year ended 30 June 2015 and prepare a  budgeted Income  Statement for the year ending 30 June 2016.

 Income Statement 2015 Budgeted Income Statement 2016 \$ \$ Increase % \$ \$ Fees Income \$224,000 +9% \$244,160 Other Income \$52,000 +3% \$56,680 Total Income \$276,000 \$300,840 Less Expenses: Office wages \$31,000 +2% \$31,620 Office Expenses \$9,600 +2% \$9,792 Marketing Expenses \$6,900 +7% \$7,383 Other Expenses \$2,000 +2% \$2,040 Insurance \$8,800 +6% \$9,328 Rent \$11,200 \$69,500 +3% \$11,536 \$71,699 Net Profit \$206,500 \$229,141

### Q9.The following budgeted bank account is given for Bennett and Gould:

 Cash at Bank 01/7/15 Balance b/d 4,000 30/6/16 Operating Expense 30,000 30/6/16 Cash sales 75,000 Plant (purchase) 20,000 Finance Ltd. — Loan 20,000 Drawings — Bennett 25,000 Motor Veh.(sale) 2,000 Cash purchases 55,000 Interest received 500 Accounts Payable 4,000 Accounts Receivable 50,000 Balance c/d 17,500 151,500 151,500

Required:Prepare a budgeted Statement of Cash Flows of Bennett and Gould for the year ended 30 June 2016 in a form consistent with AASB 107. Ignore GST for this question.

Budgeted Statement of Cash Flows for the year to end 30 June 2016

 \$ Cash flows from operating activities Receipts from customers \$75,000 Payments to suppliers \$55,000 Expenses paid \$30,000 Interest received \$500 Changes in working capital \$46,000 Net cash from operating activities \$36,500 Cash flows from investing activities Proceeds from sale of motor vehicle \$2,000 Payments for plant \$20,000 Net cash from investing activities -\$18,000 Cash flows from financing activities Proceeds of loan \$20,000 Payments for drawings \$25,000 Net cash from financing activities -\$5,000 Net change in cash balance \$13,500 Cash balance at the start of the year \$4,000 Cash balance at the end of the year \$17,500

The following questions are based on the material in Chapter 6:

### Q10.

Baron Breck Inc. uses a flexible budget and anticipates operating at between 60 and 90 per cent of maximum capacity for June. The budget summary below hasbeen completed for the 60% and 70% activity levels.

 Sales 60% 70% 80% 90% \$120,000 \$140,000 Cost of goods 84,000 98,000 Contribution margin 36,000 42,000 Operating expenses ( commission ) 29,000 33,000 Operating profit 7,000 9,000 Taxation 30% 2,100 2,700 Net profit after tax \$4,900 \$6,300

Assume thatcost of goods sold varies directly with sales, and that\$5,000 of operating expenses are fixed while the remainder vary directly with sales. Taxation will remain at 30% of operating profit.

Required:Using the format below, complete the flexible budget for June at 80% and 90% levels.

Flexible Budget for June

 Operating Activity Level 60% 70% 10% 80% 90% Sales \$120,000 \$140,000 \$20,000 \$160,000 \$180,000 Cost of Goods Sold \$84,000 \$98,000 \$14,000 \$112,000 \$126,000 Gross Profit \$48,000 \$54,000 Operating Expenses \$29,000 \$33,000 \$9000 \$37,000 \$41,000 Operating Profit \$11,000 \$13,000 Taxation 30% \$3,300 \$3,900 Net Profit After Tax \$7,700 \$9,100

(Gallani, et.al, 2016)

### Q11.

Vinton Industries uses flexible budget techniques in order to effectively control costs. The data produced for the December quarter before analysis indicates the following:

 Costof Production Items Budget Actual \$ \$ Raw material 90,000 95,700 Direct labour 108,000 114,750 Variable factory overhead 54,000 57,000 Fixed factory overhead 63,000 62,500 Total \$315,000 \$329,950

The original budget for the December quarter was planned at a level of 180,000 units of production. The quarter’s actual level of production was 195,000 units. Raw material, direct labour and variable manufacturing expense are proportional to the units produced.

Required:

( i ) A flexible budget for the December budget.

( ii )A performance report for the quarter.

( i ) Flexible budget for the  December budget:

 Actual Cost Flexible Budget Variance\$ Variance% Fav. (F) orUnfav. (U) Raw material 95,700 97,500 1,800 1.85 F Direct labour 114,750 117,000 2,250 1.92 F Variable factory overhead 57,000 58,500 1,500 2.56 F Fixed factory overhead 62,500 63,000 500 0.79 F Total Cost of Production 329,950 381,175 51,225 13.44 F

( ii ) The performance for the quarter is best described as (select one):

1.Actual production was 180,000, which was 15,000 less than budgeted for. All costs were higher than the flexible budget costs for the actual production level.

2.Actual production was 195,000, which was 15,000 less than budgeted for. All costs were lower than the flexible budget costs for the actual production level.

3.Actual production was more than budgeted for. All costs were the same as the flexible budget.

4.Actual production was 195,000, which was 15,000 more than budgeted for. All costs were lower than the flexible budget costs for the actual production level.

Record your choice here = d.

### Q12.

Dimmi Pty Ltd manufactures a single product and is capable of producing 80,000 units per year. A budgeted Income Statement for the current year is shown below:Required:Calculate the contribution margin in total and per unit using direct costing.

 Total \$ \$ per Unit Sales 576,000 8 Less Variable Costs: Production Costs 162,000 2.25 Selling & Administration Expenses 54,000 0.75 Total Variable Costs 216,000 3 Contribution Margin 360,000 5

### References

Abdullahi, S.R. And Kuwata, G., 2014, “The Role of Budget And Budgetary Control On Organisational Performance: A Case Study Of Tahir Guest House, Kano State, Nigeria”, International Journal of Innovative Research in Information Security, vol. 4, issue 2, pp. 22-28.

Basuki, F.H., 2015, “Participatory Budgeting And Managerial Performance In Conditions Of Information Asymmetry”, vol. 13, no. 6, pp. 4529-4555.

Castillo, M., 2015, “Reflections on Participatory Budgeting in New York City”, The Innovation Journal, 20(2), pp. 1-11.

Gallani, S., Krishnan, R., Marinich, E.J. and Shields, M.D., 2016, “Budgeting, Psychological Contracts, and Budgetary Misreporting”, Harvard Business School.

Liapis, K. and Spanos, P., 2015. Public Accounting Analysis under Budgeting and Controlling Process: The Greek Evidence. Procedia Economics and Finance, 33, pp.103-120.