moment it reaches the devlopment stage it becomes eligble for balance sheet and
any further amount spent and can be shown as an asset in the balance sheet.
BUDGETING
BUDGETS
THEORY
A budget is based on the objectives of a business and enables the manager to set
operational targets for the department and then to control operations by comparing
the actual results with those in the budgt.Please remember budgets are always short
term plans ( maximum one year) and they can never satisfy the long term needs.
ADVANTAGES :
•
Budgets formalize management plans. ( better planning)
•
Co-ordinate all functions of a business. ( better planning)
•
Gives a warning for future shortages of resources.
•
Increases management particiaption ( while preparing budgets) which gives
them a sense of commitement …> motivation
•
Budgeted results can be compared with actual results
•
Cash budgets are required by financial institutions when taking finance
( loans)
DISADVANTAGES:
•
Might cause de-motivation for workers if they feel budgted figures are way too
high to achieve
•
A budget will only emphaize on results and the real reasons ( non financial)
will be ignored.
•
The budgeting process will also incur cost and time.
•
There is a neeed to revise the budget because circumastances will change in
every period.
What is a master budget?
A set final of accounts ( profit and loss and balance sheet) prepared using figures
from sales, purchases and cash budget.
TYPES OF BUDGETING
Incremental Budgeting: Incremental Budgeting uses a budget prepared using a
previous period’s budget or actual performance as a base, with incremental
amounts added for the new budget period. The allocation of resources is based
upon allocations from the previous period. This approach is not recommended as
it fails to take into account changing circumstances
OMAIR MASOOD
CEDAR COLLEGE
Zero- Based Budgeting: is a technique of planning and decision-making which
reverses the working process of traditional budgeting. In traditional incremental
budgeting, departmental managers justify only increases over the previous year
358
every period.
What is a master budget?
A set final of accounts ( profit and loss and balance sheet) prepared using figures
from sales, purchases and cash budget.
TYPES OF BUDGETING
Incremental Budgeting: Incremental Budgeting uses a budget prepared using a
previous period’s budget or actual performance as a base, with incremental
amounts added for the new budget period. The allocation of resources is based
upon allocations from the previous period. This approach is not recommended as
it fails to take into account changing circumstances
Zero- Based Budgeting: is a technique of planning and decision-making which
reverses the working process of traditional budgeting. In traditional incremental
budgeting, departmental managers justify only increases over the previous year
budget and what has been already spent is automatically sanctioned. By contrast,
in zero-based budgeting, every department function is reviewed comprehensively
and all expenditures must be approved, rather than only increases. No reference
is made to the previous level of expenditure. Zero-based budgeting requires the
budget request be justified in complete detail by each division manager starting
from the zero-base. The zero-base is indifferent to whether the total budget is
increasing or decreasing
What is a principal budget factor?
Limiting factors, sometimes called principal budget factors are cicrumstances
which restricts the activiteis of a business. Examples include
•
Limited demand for a product
•
Shortage of material, which limits production
•
Shortage of labour,which also limits production
•
Shortage of amount of money to be spent.
The importance of limiting factor is that they must be identified at the start of the
budgeting process. This is because all other budgets will be dependant on the limit
factor. For example, if the limiting factor is demand for the product ( which is usually
the case), a sales budget must be prepared and all the other budgets will than be
prepared to fit in with the sales budget. But if the limiting factor is shortage of material
or labour then the production budget will be prepared first and the sales budget will
then be based on that.
What steps can be taken if the cash forecast highlights future cash shortages?
Please realize every action will have a disadvatnage aswell. So the company decides
the best possible action with least effect .
•
Delay capital expenditure for a later period
•
Delay payment of dividends
OMAIR
MASOOD
CEDAR COLLEGE
• Search
for short term borrowings
•
Issue shares
•
Control expenses
359
prepared to fit in with the sales budget. But if the limiting factor is shortage of material
or labour then the production budget will be prepared first and the sales budget will
then be based on that.
What steps can be taken if the cash forecast highlights future cash shortages?
Please realize every action will have a disadvatnage aswell. So the company decides
the best possible action with least effect .
•
Delay capital expenditure for a later period
•
Delay payment of dividends
•
Search for short term borrowings
•
Issue shares
•
Control expenses
•
Encourage debtors to pay earlier
•
Sell Surplus fixed assets
•
Negotiate better credit terms with suppliers
What is Flexible Budget and Fixed Budget? ( Done with Standard Costing)
A flexible budget is a budget which is designed to change in accordance with the
LEVEL OF ACTIVITY actually produced. The budget is designed to change
appropriately with such fluctuation in units. Main purpose of this is to take effect
of VOLUME away from the budget so that we can compare it with actual
performance.
A fixed budget, the budget remains unchanged irrespective of the level of activity
actually attained. The fixed budget is prepared based only on one level of output.
Fixed budget approach helps to ensure that each department within the
organization always knows exactly how much they have to spend at the
beginning of the period and how much is remaining at any given point during the
budgetary period as the target is pre-set this may increase motivation
OMAIR MASOOD
CEDAR COLLEGE
360
BUDGETS-WORKSHEET
BUDGETS WORKSHEET
BUDGETS(((WORKSHEET(1)(
(
Q1.
BUDGETS(((WORKSHEET(1)(
Q1
Q1.( (Harry Kari’s business is seasonal, with his sales peaking in December. The
Q1.(
Harry Kari’s
business
is seasonal,
with his
peaking
in December.
The 1997 to
following
purchases
and
sales figures
aresales
for the
months
of September
following
purchases
and
sales
figures
are
for
the
months
of
September
1997 to
January 1998. The figures from November 1997 onward are estimates.
January 1998. The figures from November 1997 onward are estimates.
September
November December
DecemberJanuary
January
September October
October November
Purchases
($) ($)
Purchases
126,000
126,000
104,000
104,000
156,000
156,000
100,000 80,000
80,000
100,000
SalesSales
($) ($)
92,000
92,000
92,000
92,000
160,000
160,000
256,000
256,000 96,000
96,000
40% of sales are for cash and attract a discount of 5%.
40% of sales are for cash and attract a discount of 5%.
50% of sales are paid for in the month following the month of sales and attract a
!
50% of
sales are
!%. for in the month following the month of sales and attract a
discount
of
2paid
!
!
discount of 2 !%.
!
5% of sales are paid for two months after the month of sale and attract no discount.
5% of5%
sales
are paid for two months after the month of sale and attract no discount.
of sales become bad debts.
5% of75%
sales
debts.
of become
purchase bad
are paid
for during the month of delivery and attract discount of
!
2 !%
75% of!purchase are paid for during the month of delivery and attract discount of
!
2 !%The remainders of the purchases are paid for during the following month and gain no
!
discount.
The remainders of the purchases are paid for during the following month and gain no
Depreciation runs at a rate of $2,500 per month.
discount.
Harry’s drawings average $600 per month. Wages paid are constant throughout the
Depreciation
runs at
rate ofexcept
$2,500
month.
year at $4,000
peramonth
for per
the last
two months of the year, when extra staff
are employed. During November, an additional 18% is paid to employ these
Harry’s
drawings
average
$600the
pertotal
month.
paid
are constant
workers,
and during
December
paid Wages
for wages
is equivalent
to thethroughout
November the
year at
$4,000
wages
bill per
plusmonth
20%. except for the last two months of the year, when extra staff
are employed. During November, an additional 18% is paid to employ these
During
August
1997 Harrythe
purchases
a new
machine
$4,000.
workers,
andthe
during
December
total paid
forpacking
wages is
equivalent
toHe
thepaid
November
$2,000 on the day of purchase and indents to pay the remainder in two equal
wages bill plus 20%.
installments in January and February 1998.
During
the Overheads
August 1997
Harry purchases
a new packing machine $4,000. He paid
Other
are constant
$500 per month
$2,000 on the day of purchase and indents to pay the remainder in two equal
At 31 October
1997, and
Harry’s
overdraft
was $36,000; his overdraft limit is $50,000.
installments
in January
February
1998.
REQUIRED:
(a) Draw up an estimated Cash Budget for each of the three months
commencing November 1997.
Other Overheads are constant $500 per month
At 31 October 1997, Harry’s overdraft was $36,000; his overdraft limit is $50,000.
(b) State what action Harry should take if his overdraft is going to exceed his
REQUIRED:
___________________________________________________________________________
limit. State three possible options.
(a) Draw up an estimated Cash Budget for each of the three months
!
___________________________________________________________________________
commencing November 1997.
!
(b) State what action Harry should take if his overdraft is going to exceed his
OMAIR
MASOOD
CEDAR COLLEGE
OMAIR
MASOOD
CEDAR
COLLEGE
limit.
State
three possible options.
1
361
BUDGETS-WORKSHEET
BUDGETS(((WORKSHEET(1)(
(
BUDGETS(((WORKSHEET(1)(
Q1
Q1.( (Harry Kari’s business is seasonal, with his sales peaking in December. The
Q1.(
Harry Kari’s
business
is seasonal,
with his
peaking
in December.
The 1997 to
following
purchases
and
sales figures
aresales
for the
months
of September
following
and sales
are for1997
the months
of are
September
1997 to
January
1998.purchases
The figures
fromfigures
November
onward
estimates.
___________________________________________________________________________
January 1998. The figures from November 1997 onward are estimates.
___________________________________________________________________________
September
November December
DecemberJanuary
January
September October
October November
___________________________________________________________________________
Purchases
($) ($)
126,000
104,000
156,000 100,000
100,000 80,000
80,000
Purchases
126,000
104,000
156,000
___________________________________________________________________________
___________________________________________________________________________
Sales
92,000
92,000
160,000
Sales
($) ($)
92,000
92,000
160,000 256,000
256,000 96,000
96,000
___________________________________________________________________________
40% of___________________________________________________________________________
sales are for cash and attract a discount of 5%.
40% of sales are for cash and attract a discount of 5%.
50% of___________________________________________________________________________
sales are paid for in the month following the month of sales and attract a
!
50% of
sales
are
!%. for in the month following the month of sales and attract a
discount
of
2paid
___________________________________________________________________________
!
!
discount of 2 !%.
!
5% of ___________________________________________________________________________
sales are paid for two months after the month of sale and attract no discount.
5% of5%
sales
are paid for two months after the month of sale and attract no discount.
of ___________________________________________________________________________
sales become bad debts.
5% of75%
sales
become
debts.
of___________________________________________________________________________
purchase bad
are paid
for during the month of delivery and attract discount of
!
2 !%
75% of!purchase
are paid for during the month of delivery and attract discount of
___________________________________________________________________________
!
2 !%The remainders of the purchases are paid for during the following month and gain no
!
___________________________________________________________________________
discount.
The remainders
of the purchases are paid for during the following month and gain no
___________________________________________________________________________
Depreciation runs at a rate of $2,500 per month.
discount.
___________________________________________________________________________
Harry’s drawings average $600 per month. Wages paid are constant throughout the
Depreciation
runs at
rate ofexcept
$2,500
month.
year at___________________________________________________________________________
$4,000
peramonth
for per
the last
two months of the year, when extra staff
are employed. During November, an additional 18% is paid to employ these
Harry’s
drawings
average
$600the
pertotal
month.
paid
are constant
___________________________________________________________________________
workers,
and during
December
paid Wages
for wages
is equivalent
to thethroughout
November the
year at
$4,000
per
month
except
for
the
last
two
months
of
the
year,
when
extra staff
wages bill plus 20%.
___________________________________________________________________________
are employed. During November, an additional 18% is paid to employ these
During
the
August
1997 Harrythe
purchases
a new
machine
$4,000.
workers,
and
during
December
total paid
forpacking
wages is
equivalent
toHe
thepaid
November
___________________________________________________________________________
$2,000 on the day of purchase and indents to pay the remainder in two equal
wages bill plus 20%.
installments in January and February 1998.
___________________________________________________________________________
During
the
August 1997
Harry purchases
a new packing machine $4,000. He paid
Other Overheads
are constant
$500 per month
___________________________________________________________________________
$2,000 on the day of purchase and indents to pay the remainder in two equal
At 31 October
1997, and
Harry’s
overdraft
was $36,000; his overdraft limit is $50,000.
installments
in January
February
1998.
___________________________________________________________________________
REQUIRED:
(a) Draw up an estimated Cash Budget for each of the three months
commencing November 1997.
___________________________________________________________________________
Other Overheads
are constant $500 per month
___________________________________________________________________________
At 31 October 1997, Harry’s overdraft was $36,000; his overdraft limit is $50,000.
(b) State what action Harry should take if his overdraft is going to exceed his
REQUIRED:
limit. State three possible options.
(a) Draw up an estimated Cash Budget for each of the three months
!
commencing November 1997.
___________________________________________________________________________
!
1
(b) ___________________________________________________________________________
State what action Harry should take if his overdraft is going to exceed his
OMAIR
MASOOD
CEDAR COLLEGE
limit. State
three possible options.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
362
Q2.
Q2
Q2.(The
following
budgeted
information
is provided
for Notlimah
LimitedLimited
for the for
six the six
Q2.(The
following
budgeted
information
is provided
for Notlimah
months
ending
30 November
2008.2008.
The business
assembles
cardboard
boxes.(boxes.(
months
ending
30 November
The business
assembles
cardboard
June June
Other Other
Sales Sales
Purchases
WagesWages
Purchases
Overheads
Overheads
$
$
$
$
$
$
$
$
46,00046,00015,00015,00010,00010,00024,00024,000
July July
47,00047,00015,60015,60010,00010,00024,00024,000
August
August
48,00048,00016,00016,00010,10010,10026,00026,000
September
September
October
October
52,00052,00017,00017,00010,60010,60024,50024,500
56,00056,00018,60018,60010,75010,75024,75024,750
Month
Month
November
60,00060,00021,00021,00011,50011,50026,20026,200
November
Additional
Information
Additional
Information
(i) (i) It is estimated
that the
bank
at 1 September
will bewill
$1,350
It is estimated
that
the balance
bank balance
at 1 September
be $1,350
overdrawn.
overdrawn.
(ii)
10% of all sales are expected to be cash sales.
(ii)
10% of all sales are expected to be cash sales.
(iii) Customers who settle their accounts within one month (including cash
(iii)
Customers who settle their accounts within one month (including cash
costumers) will receive a 5% discount settlement after one month will
costumers) will receive a 5% discount settlement after one month will
be strictly net.
be strictly net.
(iv)
It is believed that half of all credit customers will settle their debts
(iv)
It is believed that half of all credit customers will settle their debts
within one month and that the remainder will pay the following month.
within one month and that the remainder will pay the following month.
(v)
All purchases will be paid for in the month following order, so that a
(v)
All purchases will be paid for in the month following order, so that a
cash discount of 2½% can be claimed.
cash discount of 2½% can be claimed.
(vi)
Other overheads will be paid for in the month following supply.
(vi)
Other overheads will be paid for in the month following supply.
(vii) Wages are paid in the month following that in which they are earned.
(vii) Wages are paid in the month following that in which they are earned.
(viii) The half-yearly interest on $400,000, 6%loan each is due to be paid on
(viii) The half-yearly interest on $400,000, 6%loan each is due to be paid on
15 October 2008.
15 October 2008.
(ix)
A new folding machine costing $20,000 will be delivered on 1
(ix)
A new folding machine costing $20,000 will be delivered on 1
September. It will be paid for in two equal installments on 1 December
September. It will be paid for in two equal installments on 1 December
2008 and 1 June 2009.
2008 and 1 June 2009.
REQUIRED:
REQUIRED:
(a) Prepare a cash budget for each of the three months ending 30 September,
(a) Prepare a cash budget for each of the three months ending 30 September,
31 October and 30 November 2008.
October
and 30ofNovember
2008.
(b) Give 31
three
advantages
preparing budgets.
!
(b) Give three advantages of preparing budgets.
!
OMAIR
MASOOD
OMAIR MASOOD
CEDAR COLLEGE
CEDAR COLLEGE
363
2
Other Other
Sales Sales
Purchases
WagesWages
Purchases
Month
Overheads
Overheads
Month
$
$
$
$
$
$
$
$
June June
46,00046,00015,00015,00010,00010,00024,00024,000
___________________________________________________________________________
July July
47,00047,00015,60015,60010,00010,00024,00024,000
___________________________________________________________________________
August
48,00048,00016,00016,00010,10010,10026,00026,000
August
___________________________________________________________________________
September
52,00052,00017,00017,00010,60010,60024,50024,500
September
___________________________________________________________________________
October
56,00056,00018,60018,60010,75010,75024,75024,750
October
___________________________________________________________________________
November
60,00060,00021,00021,00011,50011,50026,20026,200
November
___________________________________________________________________________
Additional
Information
Additional
Information
___________________________________________________________________________
(i) (i) It is estimated
that the
bank
at 1 September
will bewill
$1,350
It is estimated
that
the balance
bank balance
at 1 September
be $1,350
___________________________________________________________________________
overdrawn.
overdrawn.
(ii) ___________________________________________________________________________
10% of all sales are expected to be cash sales.
(ii)
10% of all sales are expected to be cash sales.
(iii)___________________________________________________________________________
Customers who settle their accounts within one month (including cash
(iii) Customers who settle their accounts within one month (including cash
costumers) will receive a 5% discount settlement after one month will
___________________________________________________________________________
costumers) will receive a 5% discount settlement after one month will
be
strictly
net.
___________________________________________________________________________
be strictly net.
(iv)___________________________________________________________________________
It is believed that half of all credit customers will settle their debts
(iv)
It is believed that half of all credit customers will settle their debts
within
one month and that the remainder will pay the following month.
___________________________________________________________________________
within one month and that the remainder will pay the following month.
(v) ___________________________________________________________________________
All purchases will be paid for in the month following order, so that a
(v)
All purchases will be paid for in the month following order, so that a
cash discount of 2½% can be claimed.
___________________________________________________________________________
cash discount of 2½% can be claimed.
(vi)
Other overheads will be paid for in the month following supply.
___________________________________________________________________________
(vi)
Other overheads will be paid for in the month following supply.
(vii) Wages are paid in the month following that in which they are earned.
___________________________________________________________________________
(vii) Wages are paid in the month following that in which they are earned.
(viii) The half-yearly interest on $400,000, 6%loan each is due to be paid on
___________________________________________________________________________
(viii) The half-yearly interest on $400,000, 6%loan each is due to be paid on
15 October 2008.
___________________________________________________________________________
15 October 2008.
(ix)
A new folding machine costing $20,000 will be delivered on 1
___________________________________________________________________________
(ix)
A new folding machine costing $20,000 will be delivered on 1
September. It will be paid for in two equal installments on 1 December
___________________________________________________________________________
September. It will be paid for in two equal installments on 1 December
2008 and 1 June 2009.
___________________________________________________________________________
2008 and 1 June 2009.
REQUIRED:
___________________________________________________________________________
REQUIRED:
(a) Prepare a cash budget for each of the three months ending 30 September,
___________________________________________________________________________
(a) Prepare a cash budget for each of the three months ending 30 September,
31 October and 30 November 2008.
___________________________________________________________________________
October
and 30ofNovember
2008.
(b) Give 31
three
advantages
preparing budgets.
(b) Give three advantages of preparing budgets.
!
!
2
___________________________________________________________________________
OMAIR
MASOOD
CEDAR COLLEGE
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
364
3
Q3.
BUDGETS(((WORKSHEET(2)(
Q3
6
Ada Campellini runs a business which retails high quality clothing. It is particularly busy during the
festive season.
The budgeted sales and purchases figures for September 2012 to January 2013 are as follows:
Sales
Purchases
September
$
215 000
175 000
October
$
225 000
190 000
November
$
310 000
245 000
December
$
425 000
135 000
January
$
195 000
135 000
Additional information:
1
50% of sales are expected to be paid for by cash and these customers will receive a 6%
discount.
50% of the remaining sales are expected to be paid in the following month and these
customers will receive a 3% discount.
The remainder will pay 2 months after the sale.
2
30% of purchases are expected to be paid for in the month of purchase and will receive a 4%
discount.
40% of purchases are expected to be paid for in the month after purchase and will receive a
2% discount.
The remainder are paid for 2 months after purchase.
3
The inventories held on 1 November 2012 are budgeted at $180 000.
The inventories held on 31 January 2013 are budgeted at $129 000.
4
Total general expenses are budgeted at $18 000 in November 2012 with an expected 10%
rise in December and a 15% reduction (on the December total) in January 2013.
All general expenses are expected to be paid in full in the month in which they occur.
5
The depreciation on the non-current assets acquired before November 2012 will be $1 750
per month.
6
On 1 November 2012 Ada will acquire a new storage system at a cost of $24 000 and will pay
50% of the cost immediately. The remainder will be paid in equal instalments over the following
12 months without any interest charges.
This new non-current asset will be depreciated at 10% per annum on a monthly basis.
7
Ada will make drawings of $3 000 every month except for December 2012. In this month she
expects to draw 1.5% of the month’s expected sales.
8
The bank balance at 1 November 2012 is expected to be $34 850.
REQUIRED:
(a) Prepare a cash budget, in columnar format, for the 3 months commencing with November 2012.
[30]
(b) Prepare a budgeted income statement (profit and loss account) in as much detail as possible
from the given information for this 3 month period ending in January 2013.
[10]
(
(
OMAIR MASOOD
OMAIR MASOOD
© UCLES 2011
(
[Total: 40]
CEDAR COLLEGE
CEDAR
COLLEGE
9706/42/O/N/11
3
365
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
366
REQUIRED:
(a) Prepare a cash budget, in columnar format, for the 3 months commencing with November 2012.
[30]
(b) Prepare a budgeted income statement (profit and loss account) in as much detail as possible
from the given information for this 3 month period ending in January 2013.
[10]
(___________________________________________________________________________
[Total: 40]
3
(
(
___________________________________________________________________________
OMAIR
MASOOD
CEDAR COLLEGE
© UCLES
2011
9706/42/O/N/11
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
367
Q4.
Q4
BUDGETS(((WORKSHEET(3)
BUDGETS(((WORKSHEET(3)
Q1.Given
below
are details
of some
the budgets
Sogo Limited
for the eight
Q1.Given
below
are details
of some
of the of
budgets
of SogoofLimited
for the eight
months
ending
28 February
1990.1990.
months
ending
28 February
Month
Month
July 1989
July 1989
August 1989
September 1989
September 1989
October 1989
October 1989
November 1989
November
December
1989 1989
December
January
1990 1989
August 1989
January
February
19901990
Overhead
Overhead
Expenses
WagesWages
Expenses
$000
Sales Sales
in Units
$000
in Units
$000
$000
8,000
190
85
8,000
9,500
10,500
10,500
12,000
12,000
9,000
10,0009,000
8,50010,000
9,500
9,000 8,500
February 1990
Notes
Notes
(i)
220
250
270
240
220
200
230
9,000
190
220
250
270
240
220
200
230
104
112
120
100
101
97
85
104
112
120
100
101
99
97
99
Units are purchased at a standard cost of $60 each. Purchases are planned so that at
of each
the inventory
is sufficient
meet
thePurchases
forecast sales
target forso that at
(i) the endUnits
are month
purchased
at a standard
cost of to
$60
each.
are planned
the following
months.
the end two
of each
month the inventory is sufficient to meet the forecast sales target for
(ii)
All sales are made at a price $100 per unit. One half of the sales are made for
the following two months.
(ii)
immediate cash settlement. The remainder of the sales are on credit. Payment for
All sales are made at a price $100 per unit. One half of the sales are made for
credit sales is received as follows: 75% in the month following sale and 25% in the
immediate cash settlement. The remainder of the sales are on credit. Payment for
month after that.
credit sales is received as follows: 75% in the month following sale and 25% in the
(iii)
All purchases of units are made on one month’s credit.
(iv)
Wages and overhead expenses are paid as incurred
(v)
month after that.
(iii)
All purchases of units are made on one month’s credit.
The company is repaying a bank loan at the rate of $30,000 a month and interest on
(iv)the loan
Wages
expenses
are paid as
incurred
to be and
paidoverhead
in September
and December
1989
is expected to be $45,000 and
(v) $40,000
The
company isInterest
repaying
bank
at the due
rate in
ofDecember
$30,000 a1989
month
respectively.
on athe
bankloan
overdraft
is and interest on
the loan
be paid in September and December 1989 is expected to be $45,000 and
estimated
to beto
$3,000.
$40,0001989
respectively.
Interest
on as
thea bank
overdraft
in machine.
DecemberIn1989 is
In September
$40,000 will
be paid
10% deposit
ondue
a new
(vi)
December
1989, to
when
the machine is expected to be installed and in full production
estimated
be $3,000.
due will be
paid.
(vi)the balance
In September
1989
$40,000 will be paid as a 10% deposit on a new machine. In
(vii)
Tax ofDecember
$150,000 has
to be
paidthe
bymachine
the company
on 1 December
1989. and in full production
1989,
when
is expected
to be installed
(viii)
It is estimated that the inventory at 1 July 1989 will be 17,500 units and at 1
the balance due will be paid.
September 1989 the cash at the bank will be $24,000.
(vii)
Tax of $150,000 has to be paid by the company on 1 December 1989.
(viii)
It is estimated that the inventory at 1 July 1989 will be 17,500 units and at 1
REQUIRED:
(a) The purchases budget in units for the six months from July – December 1989.
September 1989 the cash at the bank will be $24,000.
REQUIRED:
(b) The cash budget for the four months of September, October, November and December 19
(a) The purchases budget in units for the six months from July – December 1989.
(b) The cash budget for the four months of September, October, November and December 19
OMAIR MASOOD
OMAIR MASOOD
CEDAR COLLEGE
CEDAR COLLEGE
368
4
(vi)
$40,0001989
respectively.
Interest
on as
thea bank
overdraft
in machine.
DecemberIn1989 is
In September
$40,000 will
be paid
10% deposit
ondue
a new
December
1989, to
when
the machine is expected to be installed and in full production
estimated
be $3,000.
due will be
paid.
(vi)the balance
In September
1989
$40,000 will be paid as a 10% deposit on a new machine. In
(vii)
Tax ofDecember
$150,000 has
to be
paidthe
bymachine
the company
on 1 December
1989. and in full production
1989,
when
is expected
to be installed
(viii) ___________________________________________________________________________
It is estimated that the inventory at 1 July 1989 will be 17,500 units and at 1
the balance due will be paid.
September 1989 the cash at the bank will be $24,000.
___________________________________________________________________________
(vii)
Tax of $150,000 has to be paid by the company on 1 December 1989.
REQUIRED:
(viii)
It is estimated that the inventory at 1 July 1989 will be 17,500 units and at 1
___________________________________________________________________________
(a) The
purchases budget in units for the six months from July – December 1989.
September 1989 the cash at the bank will be $24,000.
___________________________________________________________________________
REQUIRED:
(b) The cash budget for the four months of September, October, November and December 19
___________________________________________________________________________
(a) The purchases budget in units for the six months from July – December 1989.
___________________________________________________________________________
(b) The cash budget for the four months of September, October, November and December 19
___________________________________________________________________________
4
OMAIR
MASOOD
CEDAR COLLEGE
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
369
Q5.
Q5
Q2. are
Below
aredetails
given of
details
of the budgets
ofLimited
Plaxo Limited
the eight
Q2. Below
given
someofofsome
the budgets
of Plaxo
for the for
eight
31 August
monthsmonths
ending ending
31 August
1989. 1989.
MonthMonth
JanuaryJanuary
February
February
March March
April April
May
May
June
June
July
July
Overhead
Overhead
Expenses
Sales inSales in
WagesWages
Expenses
$
Units
$
Units
$
$
3,500 3,50072,000 72,00052,000 52,000
4,400 4,40086,000 86,00061,000 61,000
5,500 5,500104,000104,000
78,000 78,000
4,000 4,00080,000 80,00062,000 62,000
4,800 4,80092,000 92,00074,000 74,000
5,000 5,00098,000 98,00081,000 81,000
5,400 5,400100,000100,000
92,000 92,000
6,000 6,000123,000123,000
94,000 94,000
AugustAugust
Notes Notes
(i)
Units
are purchased
$120
each
and purchasing
is planned
(i)
Units are
purchased
at $120ateach
and
purchasing
is planned
so that so
thethat the
inventory
at the
of a is
month
is sufficient
meet the
inventory
on handonathand
the end
of aend
month
sufficient
to meettothe
(ii)
salesfor
target
the following
1 ½ months.
forecastforecast
sales target
the for
following
1 ½ months.
(ii)
Since
thebudgets
above budgets
were up,
drawn
up, increase
a 10% increase
in rates
wages rates
Since the
above
were drawn
a 10%
in wages
(iii)
hasgranted
been granted
by the company.
has been
by the company.
(iii)
Allare
sales
areon
made
onatcredit
$200
unit. Payment
All sales
made
credit
$200atper
unit.per
Payment
for halffor
a half a
is received
in the following
month
the remainder
in
month’smonth’s
sales issales
received
in the following
month and
theand
remainder
in
the after
month
after that.
the month
that.
(iv)
(iv)
All purchases
areon
made
onterms
creditand
terms
formonth
in the month
All purchases
are made
credit
areand
paidare
forpaid
in the
following
purchase.
following
purchase.
(v)
(v)
formonth
in the in
month
in they
which
are incurred.
A month’s
Wages Wages
are paidare
forpaid
in the
which
arethey
incurred.
A month’s
is obtained
on overhead
expenses.
credit iscredit
obtained
on overhead
expenses.
(vi)
Capital expenditure of $250,000 will be paid for in April.
Capital expenditure of $250,000 will be paid for in April.
(vii) At 1 January 1989 it is expected that inventory will amount to 5,700
(vii) At 1 January 1989 it is expected that inventory will amount to 5,700
units.
units.
(viii) At 1 March 1989 the estimated cash at the bank is $180,000.
(viii) At 1 March 1989 the estimated cash at the bank is $180,000.
REQUIRED:
REQUIRED:
(a) The purchases budget in units for the six months from January to June
(a) The purchases budget in units for the six months from January to June
1989.
1989.
(b) The cash budget for the four months of March, April, May and June 1989.
(b) The cash budget for the four months of March, April, May and June 1989.
OMAIR MASOOD
CEDAR COLLEGE
(vi)
370
5
(v)
following
purchase.
following
purchase.
(v)
formonth
in the in
month
in they
which
are incurred.
A month’s
Wages Wages
are paidare
forpaid
in the
which
arethey
incurred.
A month’s
is obtained
on overhead
expenses.
credit iscredit
obtained
on overhead
expenses.
(vi)
Capital expenditure of $250,000 will be paid for in April.
(vi) ___________________________________________________________________________
Capital expenditure of $250,000 will be paid for in April.
(vii) At 1 January 1989 it is expected that inventory will amount to 5,700
(vii) At 1 January 1989 it is expected that inventory will amount to 5,700
___________________________________________________________________________
units.
units.
___________________________________________________________________________
(viii) At 1 March 1989 the estimated cash at the bank is $180,000.
(viii) At 1 March 1989 the estimated cash at the bank is $180,000.
___________________________________________________________________________
REQUIRED:
REQUIRED:
___________________________________________________________________________
(a) The purchases budget in units for the six months from January to June
(a) The purchases budget in units for the six months from January to June
___________________________________________________________________________
1989.
1989.
(b) The cash budget for the four months of March, April, May and June 1989.
(b) The cash budget for the four months of March, April, May and June 1989.
___________________________________________________________________________
___________________________________________________________________________
5
OMAIR
MASOOD
CEDAR COLLEGE
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
371
Q6.
Q3.
Q6
Clare Traders has prepared the following forecasts for the five months ending 31
October 2008:
June
July
Aug
Sep
Oct
Sales ($)
280,000
250,000
270,000
280,000
290,000
Wages ($)
24,000
26,000
20,000
28,000
30,000
General expenses
30,000
33,000
31,000
34,000
35,000
Other information available:
(i)
All sales provide 60% gross profit on cost. Half the sales are paid
for in the month in which sales are made and attract a 2.5% cash
discount. The remainders are paid net in the month following sale.
(ii)
All goods are purchased one month before sales. Half of the
purchases are paid for in the month received. The remainders are
paid in the month following purchase. No discount received applies
to purchases.
(iii)
Three-quarters of the wages are paid in the current month and the
remaining quarter in the following month.
(iv)
Depreciation of $9,000 each month is included in general expenses.
Payment for general expenses is made in the month in which
expenses are incurred.
(v)
Equipment which originally cost $18,000 is to be sold for $1,000
on 15 July 2008. The receipt for this disposal is received on this
date. New equipment costing $120,000 is to be purchased and paid
for in full on 15 July 2008. Depreciation for this equipment has
been included in general expenses.
(vi)
The bank balance at 1 July 2008 is estimated to be $34,000.
REQUIRED:
(a) The cash budget for each of the three months ending 31 July, 31
August and 30 September 2008.
(b) Advise the business on three actions it should consider when a cash
budget shows a deficit cash flow position.
OMAIR MASOOD
OMAIR MASOOD
CEDAR COLLEGE
CEDAR COLLEGE
372
6
Q6
Clare Traders has prepared the following forecasts for the five months ending 31
October 2008:
June
July
Aug
Sep
Oct
Sales ($)
280,000
250,000
270,000
280,000
290,000
___________________________________________________________________________
Wages ($)
24,000
26,000
20,000
28,000
30,000
___________________________________________________________________________
General expenses
30,000
33,000
31,000
34,000
35,000
___________________________________________________________________________
Other information available:
___________________________________________________________________________
(i)
All sales provide 60% gross profit on cost. Half the sales are paid
___________________________________________________________________________
for in the month in which sales are made and attract a 2.5% cash
___________________________________________________________________________
discount. The remainders are paid net in the month following sale.
___________________________________________________________________________
(ii)
All goods are purchased one month before sales. Half of the
___________________________________________________________________________
purchases are paid for in the month received. The remainders are
___________________________________________________________________________
paid in the month following purchase. No discount received applies
___________________________________________________________________________
to purchases.
___________________________________________________________________________
___________________________________________________________________________
(iii)
Three-quarters of the wages are paid in the current month and the
___________________________________________________________________________
remaining quarter in the following month.
___________________________________________________________________________
___________________________________________________________________________
(iv)
Depreciation of $9,000 each month is included in general expenses.
___________________________________________________________________________
Payment for general expenses is made in the month in which
expenses are incurred.
___________________________________________________________________________
___________________________________________________________________________
(v)
Equipment which originally cost $18,000 is to be sold for $1,000
___________________________________________________________________________
on 15 July 2008. The receipt for this disposal is received on this
___________________________________________________________________________
date. New equipment costing $120,000 is to be purchased and paid
___________________________________________________________________________
for in full on 15 July 2008. Depreciation for this equipment has
___________________________________________________________________________
been included in general expenses.
___________________________________________________________________________
(vi)
The bank balance at 1 July 2008 is estimated to be $34,000.
___________________________________________________________________________
REQUIRED:
(a) The cash budget for each of the three months ending 31 July, 31
___________________________________________________________________________
August and 30 September 2008.
(b) Advise the business on three actions it should consider when a cash
budget shows a deficit cash flow position.
___________________________________________________________________________
___________________________________________________________________________
6
OMAIR___________________________________________________________________________
MASOOD
CEDAR COLLEGE
___________________________________________________________________________
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
373
Q7.
Q7
Q4.
The following is a summary of the Statement of Financial position for Mandeep
Limited as at 31May 1998:
$
$
Non-Current assets at cost
65,000
Less depreciation to date
14,000
51,000
Current Assets
Inventory
60,000
Trade Receivables
35,000
Bank
14,300
109,300
Current Liabilities
Trade Payables
30,000
79,300
Capital and Reserves
130,300
The company is in the process of preparing budgets for the three months ending 31
August 1998, and the following information is available:
Budgeted sales (which provide a gross profit of 25% on cost) are:
$
May
70,000
June
75,000
July
65,000
August
100,000
September
90,000
Half of the sales are paid for in the month in which the sales are made and
attract a 2% cash discount. The remainders are paid net the following month:
(i)
It has been company policy since January 1998 to arrange purchases
one month before the month of sale. Half of the purchases are paid in
!
the month received and the company has negotiated a 2 !% discount
!
for prompt payment; the remainders are paid net the following month.
(ii)
Expenses (excluding depreciation) are $8,400 per month, payable in
the month they are incurred.
(iii)
The company will be purchasing additional Non-Current assets costing
$17,000 on 1 June 1998 with 50% payable in July and the balance in
October 1998. Depreciation on all Non-Current assets is at the rate of
10% p.a. on cost (rates being charged from the date of purchase).
REQUIRED:
(a) A cash budget for the three months ending 31 August 1998
(b) A budgeted Income Statement for the three months ending 31 August
1998.
OMAIR MASOOD
OMAIR MASOOD
CEDAR COLLEGE
CEDAR COLLEGE
374
7
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
375
10% p.a. on cost (rates being charged from the date of purchase).
REQUIRED:
(a) A cash budget for the three months ending 31 August 1998
(b) A budgeted Income Statement for the three months ending 31 August
1998.
7
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
376
Q5.
Q8
The directors of Sperrabuck Limited were concerned about the company’s cash flow.
Q8. They requested the accountant to prepare a cash budget for the four months
Q5.
Q8
ending 31
October 2005.
The directors
of Sperrabuck
Limited were concerned about the company’s cash flow.
The
following
information
was available:
They
requested
the accountant
to prepare a cash budget for the four months
$
ending 31 October 2005.
(i)
Actual Sales
The following information was available:
2005
$
May
88,000
(i) Actual Sales
June
110,000
2005
Budgeted sales
May
88,000
July
82,800
June
110,000
August
87,400
Budgeted sales
September
89,700
July
82,800
October
101,250
August
87,400
November
120,000
September
89,700
December
108,000
October
101,250
(ii) Sales are made as follows:
November
120,000
December
108,000
40% of total sales are for cash
(ii) Sales are made as follows:
50% of total sales are on credit and are paid for in the month after sale
40% of total sales are for cash
10% of total sales are on credit and are paid for two months after sale
50% of total sales are on credit and are paid for in the month after sale
(iii)
10% of total sales are on credit and are paid for two months after sale
Customers purchasing on credit are allowed a discount of 2% if they pay within one
month of purchase.
(iii)
Customers purchasing on credit are allowed a discount of 2% if they pay within one
(iv)
Supplies are purchased two months before sale and paid for one month after
month of purchase.
purchase.
(iv)
Supplies are purchased two months before sale and paid for one month after
(v)
The selling price is fixed by adding a mark-up of 40% to the cost of goods sold.
purchase.
(vi)
Wages of $80,000 per month are paid in the month in which they are earned. It is
(v)
The selling price is fixed by adding a mark-up of 40% to the cost of goods sold.
expected that wages will be increased by a pay award of 5% from 1 September 2005.
(vi)
Wages of $80,000 per month are paid in the month in which they are earned. It is
(vii)
Staff is paid a bonus of 4% on all sales in excess of $80,000 each month. The bonus
expected that wages will be increased by a pay award of 5% from 1 September 2005.
is paid in the following month.
(vii)
Staff is paid a bonus of 4% on all sales in excess of $80,000 each month. The bonus
(viii)
Other expenses currently amount $7,000 per month and are paid in the month in
is paid in the following month.
which they are incurred. These expenses are expected to increase by 8% from 1
(viii)
Other expenses currently amount $7,000 per month and are paid in the month in
September 2005.
which they are incurred. These expenses are expected to increase by 8% from 1
(ix)
The company will pay a final dividend of $30,000 in August 2005.
September 2005.
(x)
Sperrabuck Limited will purchase Non-Current assets for $20,000 in September
(ix)
The company will pay a final dividend of $30,000 in August 2005.
2005.
(x)
Sperrabuck
(xi)
The
balance atLimited
bank onwill
30 purchase
June 2005Non-Current
is $12,000. assets for $20,000 in September
2005.
(xi)
The balance at bank on 30 June 2005 is $12,000.
REQUIRED:
(a) Prepare a cash budget for Sperrabuck Limited for each of the four months July, August,
REQUIRED:
September and October 2005. Prepare the budget in columnar form and make all
calculations to the nearest $.
(a) Prepare a cash budget for Sperrabuck Limited for each of the four months July, August,
September and October 2005. Prepare the budget in columnar form and make all
calculations to the nearest $.
OMAIR MASOOD
OMAIR MASOOD
OMAIR MASOOD
CEDAR COLLEGE
CEDAR COLLEGE
CEDAR COLLEGE
8
377
8
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
378
BUDGETS(((WORKSHEET(4)(
Q9.
Q9
(
3
6
Alfonso Trading Limited provides the following budgeted data for 2014.
Budgeted sales (units)
Sales price per unit
Purchase price per unit
January
5000
$10
$4
February
5200
$10
$4
March
5600
$9
$4.20
April
5800
$9.50
$4.20
May
5500
$10
$4.20
The following information is also available:
1
The company uses the FIFO method of inventory valuation.
2
The directors aim to maintain inventory levels at 25% of the following month’s sales.
They expect to achieve this on 31 December 2013 but know it will not be possible every
month. The company can buy in a maximum of 5500 units in any one month.
3
All sales are on credit. 50% of customers pay in the month following sales and receive a
cash discount of 4%. The remaining customers pay two months after sale.
4
Trade receivables on 1 January 2014 are expected to be:
$24 000 from November’s sales
$49 000 from December’s sales.
5
Trade payables on 1 January 2014 are expected to total $20 000. The company pays for
all its purchases in the month after purchase, receiving a discount of 5% for prompt
payment.
REQUIRED
(a) Prepare for each of the four months January to April 2014:
(i) Purchases budget. Show purchases for each month in both units and value.
[8]
(ii) Trade receivables budget.
[14]
___________________________________________________________________________
(iii) Trade payables budget.
[10]
__________________________________________________________________________
___________________________________________________________________________
(b) Prepare an extract from the statement of financial position at 30 April 2014 showing current
assets and current liabilities.
(
[3]
___________________________________________________________________________
___________________________________________________________________________
Additional information relating to April 2014 is as follows:
___________________________________________________________________________
Budgeted total variable costs
24 900
$
Budgeted total fixed costs
16 700
___________________________________________________________________________
REQUIRED
___________________________________________________________________________
(c) Calculate for April 2014:
___________________________________________________________________________
(i) the sensitivity of performance to changes in the selling price
[2]
___________________________________________________________________________
(ii)
the selling price per unit at which profit would be zero
[1]
(iii)
the sensitivity of performance to changes in variable cost.
[2]
[Total: 40]
© UCLES 2013
OMAIR MASOOD
OMAIR MASOOD
9706/42/M/J/13
CEDAR COLLEGE
CEDAR COLLEGE
379
9
REQUIRED
BUDGETS(((WORKSHEET(4)(
6
Q9
((a) Prepare for each of the four months January to April 2014:
3
Alfonso
Trading Limited
provides
following
datainfor
2014.
(i) Purchases
budget.
Show the
purchases
forbudgeted
each month
both
units and value.
[8]
February
March
April
May [14]
(ii) Trade receivables budget.January
Budgeted sales (units)
5000
5200
5600
5800
5500
(iii)
Trade
Sales
pricepayables
per unit budget.
$10
$10
$9
$9.50
$10 [10]
___________________________________________________________________________
Purchase price per unit
$4
$4
$4.20
$4.20
$4.20
(
(b)___________________________________________________________________________
Prepare an extract from the statement of financial position at 30 April 2014 showing current
Theassets
following
is also available:
andinformation
current liabilities.
[3]
___________________________________________________________________________
1 The
companyrelating
uses the
method
of follows:
inventory valuation.
Additional
information
to FIFO
April 2014
is as
___________________________________________________________________________
2
The directors aim to maintain inventory levels at $
25% of the following month’s sales.
They
expecttotal
to achieve
on 31 December24
2013
___________________________________________________________________________
Budgeted
variablethis
costs
900but know it will not be possible every
month.
The total
company
buy in a maximum of
Budgeted
fixed can
costs
165500
700 units in any one month.
___________________________________________________________________________
3 All sales are on credit. 50% of customers pay in the month following sales and receive a
REQUIRED
___________________________________________________________________________
cash discount of 4%. The remaining customers pay two months after sale.
(c) Calculate for April 2014:
___________________________________________________________________________
4 Trade receivables on 1 January 2014 are expected to be:
(i) the sensitivity of performance to changes in the selling price
[2]
___________________________________________________________________________
$24 000 from November’s sales
(ii) the selling
per unit
at which profit
[1]
$49price
000 from
December’s
sales.would be zero
___________________________________________________________________________
(iii)
the sensitivity of performance to changes in variable cost.
[2]
5 Trade payables on 1 January 2014 are expected to total $20 000. The company pays for
___________________________________________________________________________
all its purchases in the month after purchase, receiving a discount of 5% [Total:
for prompt
40]
payment.
___________________________________________________________________________
REQUIRED
___________________________________________________________________________
© UCLES 2013
9706/42/M/J/13
(a)___________________________________________________________________________
PrepareMASOOD
for each of the four months
January COLLEGE
to April 2014:
OMAIR
CEDAR
9
___________________________________________________________________________
(i) Purchases budget. Show purchases for each month in both units and value.
[8]
___________________________________________________________________________
(ii) Trade receivables budget.
[14]
(iii) Trade payables budget.
[10]
(
(b)___________________________________________________________________________
Prepare an extract from the statement of financial position at 30 April 2014 showing current
assets and current liabilities.
[3]
___________________________________________________________________________
Additional information relating to April 2014 is as follows:
___________________________________________________________________________
___________________________________________________________________________
Budgeted total variable costs
24 900
$
Budgeted total fixed costs
16 700
___________________________________________________________________________
REQUIRED
___________________________________________________________________________
(c)___________________________________________________________________________
Calculate for April 2014:
(i) the sensitivity of performance to changes in the selling price
[2]
___________________________________________________________________________
(ii) the selling price per unit at which profit would be zero
[1]
___________________________________________________________________________
(iii) the sensitivity of performance to changes in variable cost.
[2]
___________________________________________________________________________
[Total: 40]
___________________________________________________________________________
___________________________________________________________________________
9706/42/M/J/13
© UCLES 2013
___________________________________________________________________________
OMAIR MASOOD
OMAIR MASOOD
CEDAR COLLEGE
CEDAR COLLEGE
9
380
BUDGETS(((WORKSHEET(6)((((MANUFACTURING(BUSINESS)(
Q10.
Q10
Q1.(
Jaxo Limited budgeted unit sales for their product ‘Jaxo’ are as follows for the first
half of 1996:
Months:
Units:
January
February
March
April
May
June
700
800
800
900
1,000
1,200
Budgeted unit costs are:
$
Direct material
Direct labour
Variable overhead (other than selling expenses)
Fixed overheads
Selling expenses
3
4
2
3
3
“Jaxo” is sold for $25 per unit
80% of sales are on credit and, of that figure, it is expected that 70% will be
paid for during the month following sale and will be allowed 2½% discounts.
The remainder of the credit customers are expected to pay in full 2 months
after sale. Cash customers are allowed a discount of 3%.
Production each month is planned to meet the following month’s sales, whilst
purchases of direct materials meet the following month’s production. All
supplies are to be paid the month after purchases, to qualify for a 2% discount.
The work-force is paid for each month’s labour during the month of
production, and a bonus of $1 per unit is paid on production over 800 units.
Variable overheads and selling expenses are paid in the following month
Annual fixed overhead is $33,600, equal amounts being paid each month with
the exception of rent. Rent is paid quarterly, commencing in February of each
year. Included in the fixed overhead is $12,000 per annum for depreciation
and $4,920 per annum for rent.
New machinery costing $15,000 will be purchased in March. A deposit of
20% is to be paid in March and the remainder over 12 months in equal
interest-free monthly installments beginning in May.
At the end of February there is a Bank overdraft of $8,000.
REQUIRED:
(a) Draw up a budgeted Cash flow statement for the months of March, April
and May.
(
OMAIR
MASOOD
!
OMAIR MASOOD
CEDAR COLLEGE
CEDAR COLLEGE
381
10
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
382
Q11.
Q2(
Q11
Following!Sales!Budget!(Units)!in!given!for!Mr!Basheer.!
!
Nov(
Dec(
Jan(
Feb((
March( April(
May(
June(
3000!
2800!
3400!
4200!
4000!
3600!
4000!
3300!
!
!
1.Selling!Price!Per!unit!is!Fixed!at!$50.!!40!%!of!the!sales!are!cash!on!which!10%!
discount!is!allowed.!Out!of!the!credit!Sales!half!pay!in!one!month!on!which!2%!
discount!is!allowed,!remainder!in!two!months!but!no!discount.!
!
2.(Production!is!planned!such!that!closing!inventory!at!the!end!of!any!month!is!
20%!of!next!month!Sales.!Inventory!of!Finished!goods!at!1st!January!was!680!
units.!
!
3.(!All!Raw!material!is!purchased!such!that!closing!inventory!of!Raw!Material!is!
half!of!next!month’s!production.!Each!unit!requires!2!kg!of!material!costing!$7!
per!kg.!Suppliers!of!raw!materials!allow!a!month!credit.!Inventory!of!Raw!
Material!was!for!1780!units.!
!
4.(Direct!Labor!is!paid!one!month!after!production.!The!unit!cost!is!$8.!
!
5.(Variable!Production!Overheads!are!paid!as!incurred!the!unit!cost!is!$5.!
!
6.(Fixed!cost!is!$24000!per!annum!paid!quarterly!in!advance!,!the!first!payment!
being!1st!Jan.!!
!
7.!Selling!Expenses!are!paid!2!months!after!sales,!the!unit!cost!is!$2.!
!
!
REQUIRED:!
!
(a) Production!Budget!for!the!month!of!January!till!May.!
(b) Raw!Material!Purchases!Budget!for!the!month!of!January!till!April.!
___________________________________________________________________________
(c) Cash!Budget!for!the!month!of!Febuary!till!May.!
!
___________________________________________________________________________
!
___________________________________________________________________________
!
___________________________________________________________________________
!
!
___________________________________________________________________________
!
___________________________________________________________________________
!
!
___________________________________________________________________________
!
___________________________________________________________________________
!
!
11
383
!
OMAIR
MASOOD
CEDAR COLLEGE
OMAIR
MASOOD
CEDAR
COLLEGE
!
!
!!
2.(Production!is!planned!such!that!closing!inventory!at!the!end!of!any!month!is!
!
st!January!was!680!
20%!of!next!month!Sales.!Inventory!of!Finished!goods!at!1
REQUIRED:!
units.!
!
! (a) Production!Budget!for!the!month!of!January!till!May.!
3.(!All!Raw!material!is!purchased!such!that!closing!inventory!of!Raw!Material!is!
(b) Raw!Material!Purchases!Budget!for!the!month!of!January!till!April.!
half!of!next!month’s!production.!Each!unit!requires!2!kg!of!material!costing!$7!
(c) Cash!Budget!for!the!month!of!Febuary!till!May.!
___________________________________________________________________________
per!kg.!Suppliers!of!raw!materials!allow!a!month!credit.!Inventory!of!Raw!
!
Material!was!for!1780!units.!
! ___________________________________________________________________________
!
4.(Direct!Labor!is!paid!one!month!after!production.!The!unit!cost!is!$8.!
! ___________________________________________________________________________
! ___________________________________________________________________________
5.(Variable!Production!Overheads!are!paid!as!incurred!the!unit!cost!is!$5.!
!
! ___________________________________________________________________________
6.(Fixed!cost!is!$24000!per!annum!paid!quarterly!in!advance!,!the!first!payment!
! ___________________________________________________________________________
st!Jan.!!
!
being!1
___________________________________________________________________________
!
! ___________________________________________________________________________
7.!Selling!Expenses!are!paid!2!months!after!sales,!the!unit!cost!is!$2.!
11
! ___________________________________________________________________________
OMAIR
MASOOD
CEDAR COLLEGE
!
! ___________________________________________________________________________
REQUIRED:!
! ___________________________________________________________________________
(a) Production!Budget!for!the!month!of!January!till!May.!
___________________________________________________________________________
(b) Raw!Material!Purchases!Budget!for!the!month!of!January!till!April.!
(c) Cash!Budget!for!the!month!of!Febuary!till!May.!
!
! ___________________________________________________________________________
! ___________________________________________________________________________
!
! ___________________________________________________________________________
! ___________________________________________________________________________
!
___________________________________________________________________________
!
! ___________________________________________________________________________
! ___________________________________________________________________________
!
11
! ___________________________________________________________________________
OMAIR
MASOOD
CEDAR COLLEGE
! ___________________________________________________________________________
!
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
384
Q3.!
!
4
Q12.
Q12
3
Gala Ltd manufactures one product, the Durrell. Its sales for a six month period are expected
to be:
Q3.!
Q12
!
3
2011
July
August
September
October
November
December
Durrells
800
1050
1400
1100
950
4850
On 1Ltd
July
Gala Ltd expects
to have 100
to hold
inventory
levels of
Gala
manufactures
one product,
the Durrells
Durrell. in
Itsinventory.
sales forItaintends
six month
period
are expected
250
Durrells
at
the
end
of
July
and
August,
200
at
the
end
of
September
and
October,
and
100
to be:
thereafter.
2011
Durrells
REQUIRED
July
800
August
1050
(a) September
Prepare a monthly production budget for
Gala Ltd for the six months July to December. [6]
1400
October
1100
___________________________________________________________________________
November
950
Each
Durrell requires 2 kilos of raw material.
Until 31 August this is expected to cost $4 per kilo
December
850
___________________________________________________________________________
and $4.50 from 1 September to 30 November and $5 per kilo thereafter.
On 1 July Gala Ltd expects to have 100 Durrells in inventory. It intends to hold inventory levels of
___________________________________________________________________________
REQUIRED
250
Durrells at the end of July and August, 200 at the end of September and October, and 100
___________________________________________________________________________
thereafter.
(b) Prepare a monthly raw materials purchasing budget for the six months July to December. [6]
___________________________________________________________________________
REQUIRED
___________________________________________________________________________
Selling prices for the Durrell are expected to be $190 each in July, August and September and
(a) Prepare a monthly production budget for Gala Ltd for the six months July to December.
$200 each thereafter.
[6]
___________________________________________________________________________
All sales
arerequires
on credit.2 kilos of raw material. Until 31 August this is expected to cost $4 per kilo
Each
Durrell
and $4.50 from 1 September to 30 November and $5 per kilo thereafter.
50% of debtors pay in the month following sale and receive 4% cash discount, and the remainder
pay in the second month following sale.
REQUIRED
REQUIRED
(b)
Prepare a monthly raw materials purchasing budget for the six months July to December. [6]
(c) Calculate the expected value of trade receivables on 1 September.
[2]
___________________________________________________________________________
Selling prices for the Durrell are expected to be $190 each in July, August and September and
(d) each
Prepare
a monthly trade receivables budget for the four months September to December.
___________________________________________________________________________
$200
thereafter.
[21]
___________________________________________________________________________
All sales are on credit.
(e) State three advantages to Gala Ltd of using budgets.
[3]
___________________________________________________________________________
50%
pay in the month following sale and receive 4% cash discount, and the remainder
! (f) of(i)debtors
Name one
item
which may
pay
in
the
second
month
following
sale. appear in an income statement (profit and loss account)
___________________________________________________________________________
!
which cannot appear in a cash budget.
[1]
! (ii) Name one item which may appear in a cash budget which cannot appear in an income
REQUIRED
___________________________________________________________________________
!
!
statement (profit and loss account).
[1]
!
[Total: 40]
___________________________________________________________________________
! Prepare a monthly trade receivables budget for the four months September to December.
(d)
12
! to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. [21]
Permission
Every
___________________________________________________________________________
reasonable
effort has been
made by the publisher (UCLES)CEDAR
to trace copyright holders,
but if any items requiring clearance have unwittingly been included, the
OMAIR
MASOOD
COLLEGE
!(e) willState
publisher
be pleased to make amends at the earliest possible opportunity.
three advantages to Gala Ltd
of usingCOLLEGE
budgets.
[3] 385
OMAIR
MASOOD
CEDAR
!
! of Cambridge
University
International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
!
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
(f)
! (i) Name one item which may appear in an income statement (profit and loss account)
! ! 2011 which cannot appear in a cash budget.
[1]
© UCLES
9706/43/M/J/11
!
___________________________________________________________________________
(c) Calculate the expected value of trade receivables on 1 September.
[2]
REQUIRED
REQUIRED
(a) Prepare a monthly production budget for Gala Ltd for the six months July to December. [6]
(b) Prepare a monthly raw materials purchasing budget for the six months July to December. [6]
Each Durrell requires 2 kilos of raw material. Until 31 August this is expected to cost $4 per kilo
Q3.!
Selling
prices
the Durrell are
to be
each
July, August and September and
and $4.50
fromfor1 September
to 30expected
November
and$190
$5 per
kilointhereafter.
4
$200
each
thereafter.
Q12
!
3 REQUIRED
Gala Ltd manufactures one product, the Durrell. Its sales for a six month period are expected
All
to sales
be: are on credit.
(b) Prepare a monthly raw materials purchasing budget for the six months July to December. [6]
50% of
debtors pay in the month following sale
and receive 4% cash discount, and the remainder
2011
Durrells
pay inJuly
the second month following sale.
800
Selling
prices for the Durrell are expected to
be $190 each in July, August and September and
August
1050
REQUIRED
$200 September
each thereafter.
1400
October
1100
(c)
Calculate
expected value of trade receivables
on 1 September.
[2]
All sales
are onthe
credit.
November
950
December
850
___________________________________________________________________________
50%Prepare
of debtors
pay in the
month
followingbudget
sale and
receive
cashSeptember
discount, and
the remainder
(d)
a monthly
trade
receivables
for the
four 4%
months
to December.
pay
in
the
second
month
following
sale.
On 1 July Gala Ltd expects to have 100 Durrells in inventory. It intends to hold inventory levels[21]
of
___________________________________________________________________________
250 Durrells at the end of July and August, 200 at the end of September and October, and 100
REQUIRED
(e)
State three advantages to Gala Ltd of using budgets.
[3]
thereafter.
___________________________________________________________________________
! (f)
(c)
Calculate
expected
valuemay
of trade
receivables
on 1 September.
[2]
(i) Namethe
one
item which
appear
in an income
statement (profit and loss account)
REQUIRED
___________________________________________________________________________
!
which cannot appear in a cash budget.
[1]
(d)
Prepare
a
monthly
trade
receivables
budget
for
the
four
months
September
to
December.
(a)
Prepare
a
monthly
production
budget
for
Gala
Ltd
for
the
six
months
July
to
December.
[6]
! (ii) Name one item which may appear in a cash budget which cannot appear in an income
[21]
!
statement (profit and loss account).
[1]
!___________________________________________________________________________
(e)
State
three
advantages
Ltd of using
budgets.
[3]
Each
Durrell
requires
2 kilostoofGala
raw material.
Until
31 August this is expected to cost $4 per kilo
[Total:
40]
and $4.50 from 1 September to 30 November and $5 per kilo thereafter.
!___________________________________________________________________________
(f) (i) Name one item which may appear in an income statement (profit and loss account)
12
! REQUIRED
Permission
to reproduce
items cannot
where third-party
owned
by copyright is included has been sought and cleared where possible. Every
which
appear
in material
a cashprotected
budget.
[1]
reasonable
effort has been
made by the publisher (UCLES)CEDAR
to trace copyright holders,
but if any items requiring clearance have unwittingly been included, the
OMAIR
MASOOD
COLLEGE
!___________________________________________________________________________
publisher
will be pleased to make amends at the earliest possible opportunity.
(ii) Name one item which may appear in a cash budget which cannot appear in an income
(b) Prepare a monthly raw materials purchasing budget for the six months July to December. [6]
!___________________________________________________________________________
University
of Cambridge
International Examinations
the Cambridge Assessment Group. Cambridge Assessment is the brand name of University[1]
of
statement
(profit andis part
lossof account).
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
!___________________________________________________________________________
[Total: 40]
© UCLES 2011
9706/43/M/J/11
to be $190 each in July, August and September and
! Selling prices for the Durrell are expected
___________________________________________________________________________
each thereafter.
12
! $200
Permission
to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable
effort has been
made by the publisher (UCLES)CEDAR
to trace copyright holders,
but if any items requiring clearance have unwittingly been included, the
OMAIR
MASOOD
COLLEGE
!___________________________________________________________________________
publisher
will sales
be pleased
to make
amends at the earliest possible opportunity.
All
are
on credit.
!___________________________________________________________________________
University
of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
50%
debtorsSyndicate
pay in(UCLES),
the month
saleofand
receive
4% cash discount, and the remainder
Cambridge
which isfollowing
itself a department
the University
of Cambridge.
! payLocalinofExaminations
the second month following sale.
___________________________________________________________________________
© UCLES 2011
9706/43/M/J/11
!
___________________________________________________________________________
! REQUIRED
! (c) Calculate the expected value of trade receivables on 1 September.
___________________________________________________________________________
[2]
!___________________________________________________________________________
!
!
(d) Prepare a monthly trade receivables budget for the four months September to December.
[21]
___________________________________________________________________________
(e) State three advantages to Gala Ltd of using budgets.
[3]
!
! (f) (i) Name one item which may appear in an income statement (profit and loss account)
___________________________________________________________________________
!
which cannot appear in a cash budget.
[1]
___________________________________________________________________________
! (ii) Name one item which may appear in a cash budget which cannot appear in an income
!
statement (profit and loss account).
[1]
___________________________________________________________________________
!
[Total: 40]
___________________________________________________________________________
!
12
! to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
Permission
reasonable
effort has been
made by the publisher (UCLES)CEDAR
to trace copyright holders,
but if any items requiring clearance have unwittingly been included, the
OMAIR
MASOOD
COLLEGE
! will be pleased
386
publisher
to make amends at the earliest possible opportunity.
OMAIR
MASOOD
CEDAR COLLEGE
! of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
University
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
!
© UCLES 2011
9706/43/M/J/11
!
Q13 Q5 Q13.
Q13 Q5
Prosaic Limited
is considering
its budgetsitsforbudgets
the sixfor
months
December
Prosaic
Limited is considering
the sixending
months31
ending
31 December
1994.
All
sales
will
be
made
at
a
constant
selling
price
$25
per
and sales
1994. All sales will be made at a constant selling price $25 per unit andunit
sales
in units are
forecast to be:
in units are forecast
to be:
Month
July
Month
July
August
Sales in unitsSales in units
20,000
August
September
November
December
September
OctoberOctober
November
December
20,000
25,000
25,000
30,000
30,000
24,000 24,00027,000 27,000 24,00024,000
Variable unit costs are as follows:
Variable unit costs are as follows:
Materials
Materials Labour
Labour
Production expenses
Production Selling
expenses
expenses
Selling expenses
$
5.00
6.00
1.20
0.60
$
5.00
6.00
1.20
0.60
Overhead fixed expenses are $240,000 per year including depreciation of
$36,000
Overhead fixed expenses are $240,000 per year including depreciation of
$36,000
Monthly production will be scheduled so that finished goods’ inventory at the
end of any month are sufficient to meet one half of the sales quantities forecast
Monthly production
willfollowing
be scheduled
thatthe
finished
inventory
at the
for the next
month.soThus
closinggoods’
inventory
of finished
goods at
end of any month
are
sufficient
to
meet
one
half
of
the
sales
quantities
forecast
30 June 1994 will be 10,000 units. All raw material will be purchased one
for the next month
following
month.
Thus the closing inventory of finished goods at
before
production.
30 June 1994 will be 10,000 units. All raw material will be purchased one
material purchases are obtained on one month’s credit terms and all other
month beforeAllproduction.
expenses including labour are paid as incurred. The fixed expenses each
are equivalent
to 1 /on
12 one
of the
total forcredit
the year.
All materialmonth
purchases
are obtained
month’s
terms and all other
expenses including labour are paid as incurred. The fixed expenses each
All sales are
terms;
from half a month’s sales is received
month are equivalent
to 1made
/ 12 on
of credit
the total
for cash
the year.
in the next following month and the remainders are received one month after
that. Outstanding Trade Receivables at 30 June 1994 are $787,500, of which
All sales are$525,000
made onwill
credit
terms; cash from half a month’s sales is received
be received in July with the balance being received in August.
in the next following month and the remainders are received one month after
that. Outstanding Trade Receivables at 30 June 1994 are $787,500, of which
$525,000 will
be received in July with the balance being received in August.
REQUIRED:
(a) A production budget in units for the next six months ended 31 December
REQUIRED: 1994. Unit sales in January and February 1995 are budgeted to be 23,000
units per month.
(a) A production budget in units for the next six months ended 31 December
(b) sales
A cash
in monthly
for the six to
month
ended 31
1994. Unit
inbudget,
Januaryprepared
and February
1995basis,
are budgeted
be 23,000
December
1994.
The
budgeted
bank
balance
at
30
June
1994
is expected
units per month.
to be $71,000 overdrawn.
!
(b) A cash budget, prepared in monthly basis, for the six month ended 31
December 1994. The budgeted bank balance at 30 June 1994 is expected
to be $71,000 overdrawn.
!
OMAIR MASOOD
OMAIR MASOOD
OMAIR MASOOD
13
CEDAR COLLEGE
CEDAR COLLEGE
CEDAR COLLEGE
13
387
Overhead fixed expenses are $240,000 per year including depreciation of
$36,000
Monthly production will be scheduled so that finished goods’ inventory at the
end of any month are sufficient to meet one half of the sales quantities forecast
___________________________________________________________________________
for the next following month. Thus the closing inventory of finished goods at
30 June 1994 will be 10,000 units. All raw material will be purchased one
___________________________________________________________________________
month before production.
___________________________________________________________________________
All material purchases are obtained on one month’s credit terms and all other
__________________________________________________________________________
expenses including labour are paid as incurred. The fixed expenses each
___________________________________________________________________________
month are equivalent to 1 / 12 of the total for the year.
___________________________________________________________________________
All sales are made on credit terms; cash from half a month’s sales is received
___________________________________________________________________________
in the next following month and the remainders are received one month after
that. Outstanding Trade Receivables at 30 June 1994 are $787,500, of which
___________________________________________________________________________
$525,000 will be received in July with the balance being received in August.
___________________________________________________________________________
___________________________________________________________________________
REQUIRED:
___________________________________________________________________________
(a) A production budget in units for the next six months ended 31 December
___________________________________________________________________________
1994. Unit sales in January and February 1995 are budgeted to be 23,000
units per month.
___________________________________________________________________________
(b) A cash budget, prepared in monthly basis, for the six month ended 31
December 1994. The budgeted bank balance at 30 June 1994 is expected
to be $71,000 overdrawn.
!
___________________________________________________________________________
___________________________________________________________________________
13
OMAIR ___________________________________________________________________________
MASOOD
CEDAR COLLEGE
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
_________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
388
BUDGETS-TRADE RECEIVABLES
Q1
Q14.
Budgeted Sales (Units)
Sales price per unit
Apr May
4000 4500
$50 $48
June July Aug Sept
5500 5200 6000 5800
$50 $46 $48 $50
All Sales are on credit. Three-fourth of customers pay in the month following sales and
receive a cash discount of 5% and the remainder pay two months after the sale and receive
a cash discount of 2%
Prepare Trade Receivables budget for each of the four months (June to September)
___________________________________________________________________________
Q2
___________________________________________________________________________
Jan
Feb
Mar Apr
May
___________________________________________________________________________
Budgeted Sales (Units)
3000 3500 4500 5500 4800
Sales price per unit
$50 $48
$50 $46 $48
___________________________________________________________________________
___________________________________________________________________________
Trade receivables on 1 Feb are expected to be:
$30,000 from December’s Sales
___________________________________________________________________________
? from January’s Sales.
___________________________________________________________________________
25% of Sales are expected to be paid by cash and these customers will receive a discount of
___________________________________________________________________________
10%. 45% of Sales are expected to be paid in the following month and these customers will
___________________________________________________________________________
receive a discount of 5%.
The remainder will pay 2 months after the sale. However, 5% of this remainder would fail to
___________________________________________________________________________
pay the balance and would be written off as bad debt in the same month.
___________________________________________________________________________
Prepare Trade Receivables budget for each of the four months (Feb to May)
___________________________________________________________________________
___________________________________________________________________________
Q3
___________________________________________________________________________
May
June
July
Aug
Sept
___________________________________________________________________________
Budgeted 215,000 225,000 310,000 425,000 195,000
Sales ($)
___________________________________________________________________________
___________________________________________________________________________
50% of Sales are expected to be paid for by cash and these customers will receive a 6%
discount.
___________________________________________________________________________
50% of the remaining sales are expected to be paid in the following month and these
___________________________________________________________________________
customers will receive a 3% discount.
The remainder will pay 2 months after the sale.
___________________________________________________________________________
Prepare Trade Receivables budget for each of the three months (July to Septmber)
OMAIR MASOOD
CEDAR COLLEGE
389
receive a cash discount of 5% and the remainder pay two months after the sale and receive
a cash discount of 2%
Prepare Trade Receivables budget for each of the four months (June to September)
Q2
Q15.
Budgeted Sales (Units)
Sales price per unit
Jan
Feb
3000 3500
$50 $48
Mar Apr
May
4500 5500 4800
$50 $46 $48
Trade receivables on 1 Feb are expected to be:
$30,000 from December’s Sales
? from January’s Sales.
25% of Sales are expected to be paid by cash and these customers will receive a discount of
10%. 45% of Sales are expected to be paid in the following month and these customers will
receive a discount of 5%.
The remainder will pay 2 months after the sale. However, 5% of this remainder would fail to
pay the balance and would be written off as bad debt in the same month.
Prepare Trade Receivables budget for each of the four months (Feb to May)
___________________________________________________________________________
Q3
___________________________________________________________________________
May
June
July
Aug
Sept
___________________________________________________________________________
Budgeted 215,000 225,000 310,000 425,000 195,000
Sales ($)
___________________________________________________________________________
___________________________________________________________________________
50% of Sales are expected to be paid for by cash and these customers will receive a 6%
discount.
___________________________________________________________________________
50% of the remaining sales are expected to be paid in the following month and these
___________________________________________________________________________
customers will receive a 3% discount.
The remainder will pay 2 months after the sale.
___________________________________________________________________________
___________________________________________________________________________
Prepare Trade Receivables budget for each of the three months (July to Septmber)
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
390
The remainder will pay 2 months after the sale. However, 5% of this remainder would fail to
pay the balance and would be written off as bad debt in the same month.
Prepare Trade Receivables budget for each of the four months (Feb to May)
Q3
Q16.
May
June
July
Aug
Sept
Budgeted 215,000 225,000 310,000 425,000 195,000
Sales ($)
50% of Sales are expected to be paid for by cash and these customers will receive a 6%
discount.
50% of the remaining sales are expected to be paid in the following month and these
customers will receive a 3% discount.
The remainder will pay 2 months after the sale.
Prepare Trade Receivables budget for each of the three months (July to Septmber)
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
391
11
Question 6
BUDGETS
PAST PAPERS
PAPERS
BUDGETS-PAST
Q1.
Q1
Source B2
Stanley has been operating as a sole trader for many years with a year end of 31 December. He is
preparing a cash budget and provides the following information for the three-month period from
July 2019 to September 2019.
1
Total income of $120 000 from trade receivables for credit sales will be collected in equal
amounts over the three-month period.
2
Cash sales are expected to be 25% of the cash collected each month from credit sales.
There will be no trade receivables at 1 July 2019.
3
Total credit purchases of $75 000 will be paid for in equal amounts over the three-month
period.
4
Cash purchases are expected to be 20% of the cash paid each month for credit purchases.
There will be no trade payables at 1 July 2019.
5
The bank balance on 1 July 2019 is expected to be $3500.
6
Stanley is expected to receive a bank loan of $30 000 on 1 August 2019. Interest will be
payable monthly in arrears at 5% per annum. No capital will be repaid until July 2020.
7
New machinery costing $60 000 will be purchased by cheque on 15 August 2019. Stanley’s
policy is to depreciate machinery at 25% per annum using the straight-line method. A full
year’s depreciation is charged in the year of acquisition.
8
Stanley rents part of his business premises for $6000 per annum and receives this rental
income on a monthly basis.
9
General expenses are paid for in the month following that in which they are incurred. General
expenses incurred in June amounted to $6000. These are expected to increase by 5% in
July 2019 and a further 5% in August 2019.
10 Stanley makes annual cash drawings of $15 000 in equal instalments on 1 January and
1 July each year.
Answer the following questions in the Question Paper. Questions are printed here for
reference only.
(a) Explain three advantages of preparing a cash budget.
[6]
___________________________________________________________________________
(b) Prepare the cash budget for each of the three months beginning on 1 July 2019.
[14]
___________________________________________________________________________
(Nov18/P32/Q6a-b)
Additional information
___________________________________________________________________________
Stanley has calculated the payback period for the new machine as 4 years. He has been advised
___________________________________________________________________________
to evaluate his purchase using the net present value (NPV) method.
___________________________________________________________________________
(c) Discuss how the NPV method might give Stanley a more accurate evaluation compared to
the payback method.
[5]
___________________________________________________________________________
[Total: 25]
© UCLES 2018
OMAIR MASOOD
OMAIR MASOOD
9706/32/INSERT/O/N/18
CEDAR COLLEGE
CEDAR COLLEGE
392
14
Answer the following questions in the Question Paper. Questions are printed here for
reference only.
(a) Explain three advantages of preparing a cash budget.
(b) Prepare the cash budget for each of the three months beginning on 1 July 2019.
[6]
[14]
(Nov18/P32/Q6a-b)
___________________________________________________________________________
Additional information
___________________________________________________________________________
Stanley has calculated the payback period for the new machine as 4 years. He has been advised
to evaluate his purchase using the net present value (NPV) method.
___________________________________________________________________________
(c) Discuss how the NPV method might give Stanley a more accurate evaluation compared to
___________________________________________________________________________
the payback method.
[5]
___________________________________________________________________________
11
[Total: 25]
___________________________________________________________________________
Question 6
BUDGETS-PAST PAPERS
9706/32/INSERT/O/N/18
___________________________________________________________________________
© UCLES 2018
Source B2
Q1
___________________________________________________________________________
Stanley has been operating as a sole trader for many years with a year end of 31 December. He is
___________________________________________________________________________
preparing a cash budget and provides the following information for the three-month period from14
July 2019 to September 2019.
OMAIR
MASOOD
CEDAR COLLEGE
___________________________________________________________________________
1
Total income of $120 000 from trade receivables for credit sales will be collected in equal
___________________________________________________________________________
amounts over the three-month period.
___________________________________________________________________________
2 Cash sales are expected to be 25% of the cash collected each month from credit sales.
There will be no trade receivables at 1 July 2019.
___________________________________________________________________________
3
Total credit purchases of $75 000 will be paid for in equal amounts over the three-month
___________________________________________________________________________
period.
___________________________________________________________________________
4 Cash purchases are expected to be 20% of the cash paid each month for credit purchases.
There will be no trade payables at 1 July 2019.
___________________________________________________________________________
5
The bank balance on 1 July 2019 is expected to be $3500.
6
Stanley is expected to receive a bank loan of $30 000 on 1 August 2019. Interest will be
___________________________________________________________________________
___________________________________________________________________________
payable monthly in arrears at 5% per annum. No capital will be repaid until July 2020.
7 New machinery costing $60 000 will be purchased by cheque on 15 August 2019. Stanley’s
___________________________________________________________________________
policy is to depreciate machinery at 25% per annum using the straight-line method. A full
___________________________________________________________________________
year’s depreciation is charged in the year of acquisition.
8 Stanley rents part of his business premises for $6000 per annum and receives this rental
___________________________________________________________________________
income on a monthly basis.
___________________________________________________________________________
9
General expenses are paid for in the month following that in which they are incurred. General
expenses incurred in June amounted to $6000. These are expected to increase by 5% in
___________________________________________________________________________
July 2019 and a further 5% in August 2019.
___________________________________________________________________________
10 Stanley makes annual cash drawings of $15 000 in equal instalments on 1 January and
1 July each year.
___________________________________________________________________________
Answer the following questions in the Question Paper. Questions are printed here for
___________________________________________________________________________
reference only.
___________________________________________________________________________
(a) Explain three advantages of preparing a cash budget.
[6]
___________________________________________________________________________
___________________________________________________________________________
(b) Prepare the cash budget for each of the three months beginning on 1 July 2019.
[14]
(Nov18/P32/Q6a-b)
Additional information
Stanley has calculated the payback period for the new machine as 4 years. He has been advised
OMAIR
MASOOD
to evaluate
his purchase using theCEDAR
net presentCOLLEGE
value (NPV) method.
(c) Discuss how the NPV method might give Stanley a more accurate evaluation compared to
the payback method.
[5]
393
10
Section B: Cost and Management Accounting
Question 5
Q2.
Q2
Source B1
C Limited is a small manufacturing company which operates a budgetary control system.
The following information is available:
1
The budgeted sales in units for the first
10 five months of 2019 are expected to be:
Jan
3500
Feb B: Cost
Mar and Management
Apr
May
Section
Accounting
4000
4750
3750
4250
Question 5
2 The inventory of finished goods at 1 January 2019 is expected to be 10% of the budgeted
January sales.
Source B1
Q2
C Limited is aThe
small
manufacturing
company of
which
operates
budgetary
control system.
monthly
closing inventory
finished
goodsa is
to be maintained
at the same percentage
of the following month’s budgeted sales.
The following information is available:
3 There is a maximum inventory holding of 450 units.
1 The budgeted sales in units for the first five months of 2019 are expected to be:
Answer the following questions in the Question Paper. Questions are printed here for
Jan
Feb
Mar
Apr
May
reference
only.
3500
4000
4750
3750
4250
(a) State three advantages and two disadvantages of operating a budgetary control system. [5]
2 The inventory of finished goods at 1 January 2019 is expected to be 10% of the budgeted
January sales.
___________________________________________________________________________
(b) Prepare the production budget in units for each of the four months from January to April 2019.
The monthly closing inventory of finished goods is to be maintained at the same percentage [6]
___________________________________________________________________________
of the following month’s budgeted sales.
___________________________________________________________________________
3 There
is a maximum
inventory holding of 450 units.
Additional
information
___________________________________________________________________________
Answer
the following
questions
inkilos
theofQuestion
Paper.
printed
Each
unit produced
requires 3
raw material
whichQuestions
is expected are
to cost
$2 per here
kilo. for
reference only.
___________________________________________________________________________
The opening inventory of raw material at 1 January 2019 is expected to be 200 kilos. The closing
(a) State
threeofadvantages
andistwo
disadvantages
of operating
budgetary
system.
[5] to
inventory
raw material
expected
to remain
the same afor
January.control
It is then
expected
___________________________________________________________________________
increase by 10% for February and a further 10% for March. After that it will remain unchanged.
(b) Prepare
the production
budgetbudget
in units
each
of the
months
April
2019. from
(c) Prepare
the purchases
infor
both
kilos
andfour
dollars
forfrom
eachJanuary
of the to
four
months
[6] [6]
January to April 2019.
___________________________________________________________________________
Additional information
Additional information
___________________________________________________________________________
Each unit produced requires 3 kilos of raw material which is expected to cost $2 per kilo.
The directors are expecting an increase in demand later in the year and are considering a
___________________________________________________________________________
proposal to increase the storage capacity of the warehouse. The proposal will be beneficial to the
The opening inventory of raw material at 1 January 2019 is expected to be 200 kilos. The closing
company as it will allow an increase in the maximum inventory of finished goods holding to
inventory of raw material is expected to remain the same for January. It is then expected to
___________________________________________________________________________
500 units. The cost associated with the storage of each unit (holding cost) is $10.
increase by 10% for February and a further 10% for March. After that it will remain unchanged.
11
(d) Calculate
for the month
of February
the difference
theofcurrent
holding
cost
for the
___________________________________________________________________________
(c) Prepare
the purchases
budget
in both kilos
and dollarsbetween
for each
the four
months
from
closing
inventory
January
to April
2019. of finished goods and the holding cost if the proposal is accepted.
[6] [4]
Additional information
___________________________________________________________________________
The cost of increasing the storage capacity is expected to be $20 000. A cash budget which
___________________________________________________________________________
Additional information
includes this proposed cost has been prepared. This shows an overdrawn bank balance of
$18
0002018
at the end of February.
© UCLES
9706/31/INSERT/M/J/18
___________________________________________________________________________
The directors are expecting an increase in demand later in the year and are considering a
proposal to increase the storage capacity of the warehouse. The proposal will be beneficial to the
However, astheit will
bankallow
hasanrefused
to ingive
business
an overdraft.
Thegoods
directors
areto now
___________________________________________________________________________
company
increase
the the
maximum
inventory
of finished
holding
considering
investing
their own
money
as a loan
to the
business
finance
the proposal.
500
units. The
cost associated
with
the storage
of each
unit
(holdingtocost)
is $10.
___________________________________________________________________________
11
(e) Calculate
Discuss the
disadvantages
to thebetween
directors
investing
their cost
ownfor
funds
(d)
for advantages
the month ofand
February
the difference
theofcurrent
holding
the into
the
business.
___________________________________________________________________________
closing inventory of finished goods and the holding cost if the proposal is accepted.
[4] [4]
Additional information
[Total: 25]
___________________________________________________________________________
The cost of increasing the storage capacity is expected to be $20 000. A cash budget which
(Jun18/P31/Q5)
(Jun18/P33/Q5)
includes
this proposed
cost has been prepared. This shows an overdrawn bank balance of
$18
000
at
the
end
of
February.
© UCLES 2018
9706/31/INSERT/M/J/18
OMAIR MASOOD
OMAIR MASOOD
CEDAR COLLEGE
CEDAR COLLEGE
However, the bank has refused to give the business an overdraft. The directors are now
considering investing their own money as a loan to the business to finance the proposal.
(e) Discuss the advantages and disadvantages to the directors of investing their own funds into
394
15
10
(a) State three advantages and two disadvantages
of operating a budgetary control system. [5]
Section B: Cost and Management Accounting
(b) Prepare the production budget in units for each of the four months from January to April 2019.
Question 5
[6]
Source B1
Additional information
C Limited is a small manufacturing company which operates a budgetary control system.
Each unit produced requires 3 kilos of raw material which is expected to cost $2 per kilo.
The following information is available:
The opening inventory of raw material at 1 January 2019 is expected to be 200 kilos. The closing
1inventory
The budgeted
sales in units
for the first
five months
of 2019
expected
to then
be: expected to
of raw material
is expected
to remain
the same
forare
January.
It is
increase by 10% for February and a further 10% for March. After that it will remain unchanged.
Jan
Feb
Mar
Apr
May
3500
4000
4750
3750
4250
(c) Prepare the purchases budget in both kilos and dollars for each of the four months from
January to April 2019.
[6]
2 The inventory of finished goods at 1 January 2019 is expected to be 10% of the budgeted
January sales.
___________________________________________________________________________
Additional information
The monthly closing inventory of finished goods is to be maintained at the same percentage
___________________________________________________________________________
the following
budgeted
sales.in demand later in the year and are considering a
Theofdirectors
are month’s
expecting
an increase
proposal to increase the storage capacity of the warehouse. The proposal will be beneficial to the
___________________________________________________________________________
3company
There is
holding
units. inventory of finished goods holding to
asa itmaximum
will allowinventory
an increase
in of
the450
maximum
500 units. The cost associated with the storage of each unit (holding cost) is $10.
___________________________________________________________________________
Answer
the following questions in the Question Paper. Questions are printed here for
11
reference
only.
(d) Calculate
for the month of February the difference between the current holding cost for the
___________________________________________________________________________
closing inventory of finished goods and the holding cost if the proposal is accepted.
[4]
Additional
(a) Stateinformation
three advantages and two disadvantages of operating a budgetary control system. [5]
Q2
___________________________________________________________________________
The cost of increasing the storage capacity is expected to be $20 000. A cash budget which
___________________________________________________________________________
(b) Prepare
the production
in units
for eachThis
of theshows
four months
from January
to April
2019.of
includes
this proposed
cost budget
has been
prepared.
an overdrawn
bank
balance
[6]
$18
0002018
at the end of February.
© UCLES
9706/31/INSERT/M/J/18
___________________________________________________________________________
However, the bank has refused to give the business an overdraft. The directors are now
Additional
information
___________________________________________________________________________
considering
investing
their own money as a loan to the business to finance the proposal.
Each
unit the
produced
requires
3 kilos
of raw material
which
is expected
to cost $2
perown
kilo.funds into
(e)___________________________________________________________________________
Discuss
advantages
and
disadvantages
to the
directors
of investing
their
the business.
[4]
The opening inventory of raw material at 1 January 2019 is expected to be 200 kilos. The closing
___________________________________________________________________________
inventory of raw material is expected to remain the same for January. It is then expected to
[Total: 25]
increase by 10% for February and a further 10% for March. After that it will remain unchanged.
___________________________________________________________________________
(Jun18/P31/Q5) (Jun18/P33/Q5)
(c) Prepare the purchases budget in both kilos and dollars for each of the four months from
___________________________________________________________________________
January to April 2019.
[6]
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
15
Additional information
The directors are expecting an increase in demand later in the year and are considering a
proposal to increase the storage capacity of the warehouse. The proposal will be beneficial to the
company as it will allow an increase in the maximum inventory of finished goods holding to
500 units. The cost associated with the storage of each unit (holding cost) is $10.
11
(d) Calculate for the month of February the difference between the current holding cost for the
closing inventory of finished goods and the holding cost if the proposal is accepted.
[4]
Additional information
The___________________________________________________________________________
cost of increasing the storage capacity is expected to be $20 000. A cash budget which
includes this proposed cost has been prepared. This shows an overdrawn bank balance of
___________________________________________________________________________
$18
0002018
at the end of February.
© UCLES
9706/31/INSERT/M/J/18
___________________________________________________________________________
However,
the bank has refused to give the business an overdraft. The directors are now
considering investing their own money as a loan to the business to finance the proposal.
___________________________________________________________________________
(e) Discuss the advantages and disadvantages to the directors of investing their own funds into
___________________________________________________________________________
the business.
[4]
___________________________________________________________________________
[Total: 25]
(Jun18/P31/Q5) (Jun18/P33/Q5)
OMAIR MASOOD
OMAIR MASOOD
CEDAR COLLEGE
CEDAR COLLEGE
15395
company as it will allow an increase in the maximum inventory of finished goods holding to
The opening inventory of raw material at 1 January 2019 is expected to be 200 kilos. The closing
500 units. The cost associated with the storage of each unit (holding cost) is $10.
inventory of raw material is expected to remain the same for January. It is then expected to
1110% for March. After that it will remain unchanged.
increase by 10% for February and a further
(d) Calculate for the month of February the difference between the current holding cost for the
closing inventory of finished goods and the holding cost if the proposal is accepted.
[4]
(c) Prepare
the purchases budget in both kilos and dollars for each of the four months from
Additional
information
January to April 2019.
[6]
The cost of increasing the storage capacity is expected to be $20 000. A cash budget which
includes this proposed cost has been prepared. This shows an overdrawn bank balance of
Additional
information
$18
000
at the end
of February.
© UCLES
2018
9706/31/INSERT/M/J/18
The directors
expecting
demand an
lateroverdraft.
in the year
are considering
However,
the bankare
has
refused an
to increase
give theinbusiness
Theand
directors
are now a
proposal
to increase
storage
of the
warehouse.
proposal
be beneficial to the
considering
investing
theirthe
own
moneycapacity
as a loan
to the
businessThe
to finance
thewill
proposal.
company as it will allow an increase in the maximum inventory of finished goods holding to
500 units.
cost associated
with the storage
each
unit (holding
cost) istheir
$10.own funds into
(e) Discuss
theThe
advantages
and disadvantages
to of
the
directors
of investing
the business.
[4]
11
(d) Calculate for the month of February the difference between the current holding cost for the
closing inventory of finished goods and the holding cost if the proposal is accepted.
[Total: 25][4]
Additional information
___________________________________________________________________________
(Jun18/P31/Q5) (Jun18/P33/Q5)
The cost of increasing the storage capacity is expected to be $20 000. A cash budget which
___________________________________________________________________________
includes this proposed cost has been prepared. This shows an overdrawn bank balance of
$18
0002018
at the end of February.
© UCLES
9706/31/INSERT/M/J/18
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
15
___________________________________________________________________________
However, the bank has refused to give the business an overdraft. The directors are now
considering investing their own money as a loan to the business to finance the proposal.
___________________________________________________________________________
(e) Discuss the advantages and disadvantages to the directors of investing their own funds into
___________________________________________________________________________
the business.
[4]
[Total: 25]
(Jun18/P31/Q5) (Jun18/P33/Q5)
Q3.
Q3
6
15
9
OMAIR MASOOD
CEDAR COLLEGE
J Limited sells a single product at a mark-up of 25%. The following information is available:
1
Sales revenue:
$
2017
November
December
150 000
180 000
2018
January
February
March
April
200 000
210 000
225 000
240 000
2
All sales are on credit and customers have a credit period of 2 months.
3
All purchases are on credit and suppliers are paid in the month following purchases.
4
Inventory level at the end of each month will be maintained at 25% of the sales volume in the
following month.
5
Monthly operating costs are expected to be $18 000, which includes $3000 depreciation.
6
Balance at bank at 1 January 2018 is expected to be $4500.
REQUIRED
© UCLES 2018
9706/31/INSERT/M/J/18
[Turn over
(a) Prepare the cash budget for each of the three months from January to March 2018.
[9]
(b) Prepare a budgeted income statement for the three-month period ending 31 March 2018. [3]
OMAIR MASOOD
CEDAR COLLEGE
(c) Prepare a reconciliation of the profit from operations for the three-month period ending
31 March 2018 to the net cash at 31 March 2018.
[8]
Additional information
396
___________________________________________________________________________
9
Q3
___________________________________________________________________________
6
J Limited sells a single product at a mark-up of 25%. The following information is available:
___________________________________________________________________________
1
Sales revenue:
___________________________________________________________________________
$
___________________________________________________________________________
2017
November
150 000
___________________________________________________________________________
December
180 000
___________________________________________________________________________
2018
January
200 000
___________________________________________________________________________
February
210 000
March
225 000
___________________________________________________________________________
April
240 000
___________________________________________________________________________
2
All sales are on credit and customers have a credit period of 2 months.
3
All purchases are on credit and suppliers are paid in the month following purchases.
4
Inventory level at the end of each month will be maintained at 25% of the sales volume in the
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
following month.
___________________________________________________________________________
5 Monthly operating costs are expected to be $18 000, which includes $3000 depreciation.
___________________________________________________________________________
6
Balance at bank at 1 January 2018 is expected to be $4500.
___________________________________________________________________________
REQUIRED
___________________________________________________________________________
(a) Prepare the cash budget for each of the three months from January to March 2018.
[9]
___________________________________________________________________________
(b) Prepare a budgeted income statement for the three-month period ending 31 March 2018. [3]
___________________________________________________________________________
(c) Prepare a reconciliation of the profit from operations for the three-month period ending
31 March 2018 to the net cash at 31 March 2018.
[8]
___________________________________________________________________________
Additional information
___________________________________________________________________________
___________________________________________________________________________
The directors are considering investing $60 000 in a new computer system to improve inventory
control. According to the payment terms, 50% is payable in March 2018 and the remaining
___________________________________________________________________________
50% in the following month.
___________________________________________________________________________
REQUIRED
___________________________________________________________________________
(d) Advise the directors whether or not they should purchase the new computer. Justify your
answer.
[5]
___________________________________________________________________________
[Total: 25]
___________________________________________________________________________
(Nov17/P32/Q6)
___________________________________________________________________________
___________________________________________________________________________
OMAIR MASOOD
© UCLES 2017
OMAIR MASOOD
9706/32/O/N/17
CEDAR
COLLEGE
CEDAR COLLEGE
397
16
2018
(a) Prepare the cash budget for each of the three months from January to March 2018.
[9]
January
200 000
February
210 000
March
225 income
000
(b) Prepare a budgeted
statement for the three-month period ending 31 March 2018. [3]
April
240 000
2(c) All
sales are
on credit and of
customers
have
a credit period of 2 months.
Prepare
a reconciliation
the profit
from
9 operations for the three-month period ending
31 March 2018 to the net cash at 31 March 2018.
[8]
3Q3 All purchases are on credit and suppliers are paid in the month following purchases.
6 J Limited sells a single product at a mark-up of 25%. The following information is available:
Additional information
___________________________________________________________________________
4 Inventory level at the end of each month will be maintained at 25% of the sales volume in the
1 Sales revenue:
Thefollowing
directorsmonth.
are considering investing $60 000 in a new computer system to improve inventory
_________________________________________________________________________
control. According to the $
payment terms, 50% is payable in March 2018 and the remaining
550%Monthly
operating
costs are expected to be $18 000, which includes $3000 depreciation.
in2017
the following
month.
___________________________________________________________________________
November
150 000
6REQUIRED
Balance at bank at 1 January 2018 is expected to be $4500.
___________________________________________________________________________
December
180 000
REQUIRED
___________________________________________________________________________
(d) Advise the directors whether or not they should purchase the new computer. Justify your
2018
answer.
[5]
January
200 000
___________________________________________________________________________
(a) Prepare
the cash budget
for each of the three months from January to March 2018.
[9]
February
210 000
[Total: 25]
March
225 000
___________________________________________________________________________
April a budgeted240
000 statement for the three-month period ending 31 March 2018. [3]
(Nov17/P32/Q6)
(b) Prepare
income
___________________________________________________________________________
2
All sales are on credit and customers have a credit period of 2 months.
3
All purchases are on credit and suppliers are paid in the month following purchases.
___________________________________________________________________________
(c) Prepare a reconciliation of the profit from operations for the three-month period ending
31 March 2018 to the net cash at 31 March 2018.
[8]
___________________________________________________________________________
4 Inventory level at the end of each month will be maintained at 25% of the sales volume in the
Additional information
following month.
The2017
directors
© UCLES
are considering investing $60
000 in a new computer system to improve inventory
9706/32/O/N/17
5 Monthly operating costs are expected to be $18 000, which includes $3000 depreciation.
control. According to the payment terms, 50% is payable in March 2018 and the remaining
OMAIR
MASOOD
CEDAR COLLEGE
50% in the following
month.
6 Balance at bank at 1 January 2018 is expected to be $4500.
16
REQUIRED
REQUIRED
(d)(a)Advise
thethe
directors
whether
or notofthey
should
purchase
the newtocomputer.
Justify your
Prepare
cash budget
for each
the three
months
from January
March 2018.
[9]
answer.
[5]
(b) Prepare a budgeted income statement for the three-month period ending 31 March[Total:
2018. 25]
[3]
___________________________________________________________________________
(Nov17/P32/Q6)
___________________________________________________________________________
(c) Prepare a reconciliation of the profit from operations for the three-month period ending
___________________________________________________________________________
31 March 2018 to the net cash at 31 March 2018.
[8]
___________________________________________________________________________
Additional information
___________________________________________________________________________
The directors are considering investing $60 000 in a new computer system to improve inventory
control. According to the payment terms, 50% is payable in March 2018 and the remaining
___________________________________________________________________________
9706/32/O/N/17
50% in the following month.
© UCLES 2017
OMAIR
MASOOD
CEDAR COLLEGE
___________________________________________________________________________
REQUIRED
16
___________________________________________________________________________
(d) Advise the directors whether or not they should purchase the new computer. Justify your
answer.
[5]
___________________________________________________________________________
[Total: 25]
(Nov17/P32/Q6)
© UCLES 2017
OMAIR MASOOD
OMAIR MASOOD
9706/32/O/N/17
CEDAR
COLLEGE
CEDAR COLLEGE
398
16
6
6
11
Q4.
Q4
Luke’s business is due to start on 1 April 2018, selling a single product obtained from a sole
supplier.
11
Q4
The purchase
price
is $40
unit
Luke2018,
will sell
each unit
at a mark-up
60%. from a sole
Luke’s
business
is due
to per
start
onand
1 April
selling
a single
product of
obtained
supplier.
He also wants to maintain inventory at a level sufficient to cover 50% of the next month’s sales.
The purchase price is $40 per unit and Luke will sell each unit at a mark-up of 60%.
Budgeted unit sales for the first four months of trading are as follows:
He also wants to maintain inventory at a level sufficient to cover 50% of the next month’s sales.
April
May
June
July
5000unit sales
8000
3000
Budgeted
for the first4000
four months
of trading are as follows:
The following
information
is also
available:July
April
May
June
5000
8000
4000
3000
1 Luke will introduce $150 000 capital into the business bank account on 1 April 2018. On the
same day,
equipmentiscosting
$48 000 will be purchased by cheque.
The following
information
also available:
12
3
2
4
3
4
Equipment
will be depreciated
over ainto
period
60 months
with
no residual
value.2018. On the
Luke
will introduce
$150 000 capital
the of
business
bank
account
on 1 April
same day, equipment costing $48 000 will be purchased by cheque.
All purchases are expected to be paid one month after the purchases are made.
Equipment will be depreciated over a period of 60 months with no residual value.
All sales will be on credit.
All purchases are expected to be paid one month after the purchases are made.
20% of customers are expected to take a cash discount of 1 1 % and pay in the month of sale.
2
All sales will be on credit.
30% of customers are expected to pay one month after the sales are made.
20% of customers are expected to take a cash discount of 1 1 % and pay in the month of sale.
2
The remaining customers are expected to pay two months after the sales are made.
30% of customers are expected to pay one month after the sales are made.
5 Monthly operating expenses will be paid in the month they are incurred. They are expected to
000 including
depreciation.
be $43
The
remaining
customers
are expected to pay two months after the sales are made.
5REQUIRED
Monthly operating expenses will be paid in the month they are incurred. They are expected to
be $43 000 including depreciation.
(a) State two benefits of preparing a cash budget.
[2]
REQUIRED
___________________________________________________________________________
(b) State
Prepare
cash budget
for each
of the
three months April, May and June 2018.
(a)
twothe
benefits
of preparing
a cash
budget.
[11]
[2]
(c) Prepare
Comment
Luke’s
working
capital
(b)
theoncash
budget
for each
of management.
the three months April, May and June 2018.
[6]
[11]
___________________________________________________________________________
___________________________________________________________________________
(d) Comment
Prepare a on
budgeted
income statement
for the three-month period ending 30 June 2018.
(c)
Luke’s working
capital management.
[6]
___________________________________________________________________________
[Total: 25]
___________________________________________________________________________
(d) Prepare a budgeted income statement for the three-month period ending 30 June 2018. [6]
(Nov17/P33/Q6)
___________________________________________________________________________
[Total: 25]
(Nov17/P33/Q6)
___________________________________________________________________________
___________________________________________________________________________
© UCLES 2017
OMAIR MASOOD
OMAIR MASOOD
© UCLES 2017
9706/33/O/N/17
CEDAR
COLLEGE
CEDAR COLLEGE
9706/33/O/N/17
399
17
17
3
All purchases are expected to be paid one month after the purchases are made.
also
wants
inventory at a level sufficient to cover 50% of the next month’s sales.
4 He All
sales
willtobemaintain
on credit.
Budgeted unit sales for the first four months of trading are as follows:
20% of customers are expected to take a cash discount of 1 1 % and pay in the month of sale.
2
April
May
June
July
___________________________________________________________________________
30%
of customers
are expected
5000
8000
4000to pay one
3000month after the sales are made.
___________________________________________________________________________
The
remaining
customers
are expected
The
following
information
is also
available: to pay two months after the sales are made.
___________________________________________________________________________
5 Monthly operating expenses will be paid in the month they are incurred. They are expected to
1
Luke will introduce $150 000 capital into the business bank account on 1 April 2018. On the
depreciation.
besame
$43 000
day,including
equipment
costing $48 000 will be purchased by cheque.
___________________________________________________________________________
REQUIRED
2 Equipment will be depreciated over a period of 60 months with no residual value.
___________________________________________________________________________
11
(a)
State
two
benefits
of
preparing
a
cash
budget.
[2]
Q4
3 All purchases are expected to be paid one month after the purchases are made.
___________________________________________________________________________
6 Luke’s business is due to start on 1 April 2018, selling a single product obtained from a sole
supplier.
___________________________________________________________________________
4 All sales will be on credit.
(b) Prepare the cash budget for each of the three months April, May and June 2018.
[11]
___________________________________________________________________________
The20%
purchase
price is $40
per unit and
Lukeawill
selldiscount
each unit
of customers
are expected
to take
cash
of at
1 1a%mark-up
and payofin60%.
the month of sale.
2
(c)
working
capital
He Comment
also wantson
toLuke’s
maintain
inventory
at amanagement.
level sufficient to cover 50% of the next month’s sales.[6]
30% of customers are expected to pay one month after the sales are made.
Budgeted unit sales for the first four months of trading are as follows:
___________________________________________________________________________
(d) Prepare
a budgeted
income
statement
ending
2018. [6]
The remaining
customers
are
expectedfor
to the
paythree-month
two months period
after the
sales30
areJune
made.
April
May
June
July
___________________________________________________________________________
[Total: 25]
5000 operating
8000expenses
4000
3000
5 Monthly
will be paid
in the month they are incurred. They are expected to
___________________________________________________________________________
be $43 000 including depreciation.
(Nov17/P33/Q6)
The following information is also available:
___________________________________________________________________________
REQUIRED
1 Luke will introduce $150 000 capital into the business bank account on 1 April 2018. On the
___________________________________________________________________________
same two
day,benefits
equipment
costing $48
000 will
be purchased by cheque.
(a) State
of preparing
a cash
budget.
[2]
___________________________________________________________________________
2 Equipment will be depreciated over a period of 60 months with no residual value.
(b) Prepare the cash budget for each of the three months April, May and June 2018.
[11]
___________________________________________________________________________
3
All purchases are expected to be paid one month after the purchases are made.
___________________________________________________________________________
4
All sales will
on credit.
onbe
Luke’s
working capital9706/33/O/N/17
management.
(c)2017
Comment
© UCLES
[6]
___________________________________________________________________________
1
20% of customers
are expectedCEDAR
to take a cashCOLLEGE
discount of 1 % and pay in the month of sale.
OMAIR
MASOOD
2
(d) Prepare a budgeted income statement for the three-month period ending 30 June 2018. [6]
17
30% of customers are expected to pay one month after the sales are made.
[Total: 25]
___________________________________________________________________________
The remaining customers are expected to pay two months after the sales are made.
(Nov17/P33/Q6)
___________________________________________________________________________
5
Monthly operating expenses will be paid in the month they are incurred. They are expected to
___________________________________________________________________________
be $43 000 including depreciation.
___________________________________________________________________________
REQUIRED
___________________________________________________________________________
(a) State two benefits of preparing a cash budget.
[2]
___________________________________________________________________________
(b) Prepare the cash budget for each of the three months April, May and June 2018.
[11]
___________________________________________________________________________
9706/33/O/N/17
© UCLES 2017
___________________________________________________________________________
(c) CommentMASOOD
on Luke’s working capital
management.
OMAIR
CEDAR
COLLEGE
17
[6]
___________________________________________________________________________
(d) Prepare a budgeted income statement for the three-month period ending 30 June 2018. [6]
___________________________________________________________________________
[Total: 25]
(Nov17/P33/Q6)
OMAIR MASOOD
CEDAR COLLEGE
400
10
Q5.
Q5
6
Q5
6
The directors of Slanting Stores Limited have prepared a cash budget.
REQUIRED
10
(i) State
one difference
between
a cash
budget
and abudget.
statement of cash flows.
The (a)
directors
of Slanting
Stores Limited
have
prepared
a cash
[1]
(ii) State two benefits of preparing a cash budget.
[2]
___________________________________________________________________________
REQUIRED
Additional information
(a) ___________________________________________________________________________
(i) State one difference between a cash budget and a statement of cash flows.
[1]
Slanting Stores Limited makes all its sales on credit. Half of all credit customers pay in the month
(ii)
State
two benefits
of discount
preparingfor
a cash
[2]
10
of sale,
receiving
a cash
early budget.
payment.
The remainder pay in the following month.
Q5
Purchases for resale are paid for in the month after purchase.
Additional
information
6 ___________________________________________________________________________
The directors of Slanting Stores Limited have prepared a cash budget.
The cash budget for the three months ending 31 March 2017 is as follows:
Slanting Stores Limited makes all its sales on credit. Half of all credit customers pay in the month
___________________________________________________________________________
REQUIRED
of sale,
receiving
a budget
cash discount
for early
payment.
remainder
Cash
for the three
months
endingThe
31 March
2017pay in the following month.
Purchases
for
resale
are
paid
for
in
the
month
after
purchase.
___________________________________________________________________________
(a) (i) State one difference between a cash budget and a statement of cash flows.
[1]
January
February
March
The___________________________________________________________________________
cash budget for the three months ending 31$March 2017 is as
$ follows:
$
(ii) State two benefits of preparing a cash budget.
[2]
Opening balance
17 800
17 300
(1 600)
Cash
budgetoffor
the three months ending
2017
Receipts
– month
sale
28 500 31 March 26
125
30 875
Additional
information
Receipts – month following sale
40 000
30 000
27 500
March
Slanting Stores
Limited makes all itsJanuary
sales
credit.February
Half(33
of all
credit
customers
Payments
to suppliers
(44on
000)
000)
(35
750) pay in the month
$ payment. The
$ remainder $pay in the following month.
of sale, receiving a cash discount for early
Wages
(10 000)
(10 125)
(8 575)
Opening
balance
17 month
800 after purchase.
17 300
(1 600)
Purchases
for resale are paid for in the
Other
expenses
(15 000)
(14 800)
(12 200)
Receipts – month of sale
28 500
26 125
30 875
Dividend paid
–
(8 000)
–
Receipts
– month
following
40 000 31 March
302017
000 is as follows:
27 500
The cash
budget
for thesale
three
Purchase
of
non-current
asset months ending
–
(9 100)
–
Payments to suppliers
(44 000)
(33 000)
(35 750)
Closing balance
17 300
(1 600)
250
Cash budget for the three (10
months
March
Wages
000) ending 31
(10
125) 2017(8 575)
Other
expenses
(15 000)
(14 800)
(12 200)
REQUIRED
000)
– March
Dividend paid
–January
(8February
$
$
(b) Calculate
Purchase
of non-current asset
–
(9 100)
– $
Opening
balance
17 800
17 300
(1 600)
Closing
balance
17 300
(1 600)
250
Receipts
– month
sale for each of the28
500months January
26 125to March
30 875
(i) the
value of sales
three
2017,
[3]
Receipts – month following sale
40 000
30 000
27 500
REQUIRED
(ii) thetovalue
of cash discount for each
of the three months
January
March 2017,
[3]
Payments
suppliers
(44 000)
(33 000)
(35to
750)
(b) Calculate
Wages
(10 000)
(10 125)
(8 575)
(iii)expenses
the rate of cash discount given. (15 000)
[1]
Other
(14 800)
(12 200)
(i) the value
January
March 2017,
[3]
Dividend
paid of sales for each of the three months
–
(8to
000)
–
Purchase
of
non-current
asset
–
(9
100)
–
(c) Prepare
the
trade discount
receivables
budget
the three
months January
to March[3]
2017.
(ii)
the value
of cash
for each
of for
the each
three of
months
Closing
balance
(1January
600)000.to March
250 2017,
Trade
receivables at 1 January 2017 17
are300
expected to be
$40
[8]
(iii)
the
rate
of
cash
discount
given.
[1]
REQUIREDinformation
Additional
(b) Calculate
directors
wishreceivables
to eliminatebudget
the expected
cashmonths
at the January
end of February.
They are
(c) The
Prepare
the trade
for eachdeficit
of theinthree
to March 2017.
considering
payingat
$15
000 in January
forexpected
an advertising
campaign
which is expected to increase
Trade
receivables
1
January
2017
are
to
be
$40
000.
[8] [3]
(i) the value of sales for each of the three months January to March 2017,
sales from February onwards.
Additional
(ii) information
the value of cash discount for each of the three months January to March 2017,
[3]
REQUIRED
___________________________________________________________________________
The directors
wish
the expected
(iii) the
ratetoofeliminate
cash discount
given. deficit in cash at the end of February. They are [1]
(d) Calculate
increaseforinan
February’s
sales,
after the
advertising
campaign,
needed
___________________________________________________________________________
considering
payingthe
$15required
000 in January
advertising
campaign
which
is expected
to increase
to
avoid
the
negative
cash
balance.
[5]
sales from February onwards.
___________________________________________________________________________
(c) Prepare the trade receivables budget for each of the three months January to March 2017.
Trade receivables
at 1 actions
Januarythe
2017
are expected
to beother
$40 000.
[8]
REQUIRED
(e) Suggest
two possible
directors
could take,
than the advertising campaign,
___________________________________________________________________________
to improve
the cash flow.
[2]
information
(d) Additional
Calculate the
required increase in February’s sales, after the advertising campaign, needed
___________________________________________________________________________
to avoid the negative cash balance.
[5]
The directors wish to eliminate the expected deficit in cash at the end of February.[Total:
They 25]
are
___________________________________________________________________________
considering
paying
$15
000
in
January
for
an
advertising
campaign
which
is
expected
to
increase
(Nov16/P32/Q6)
(e)
Suggest
two
possible
actions the directors
could take, other than the advertising campaign,
sales
February
onwards.
©
UCLES
2016from
9706/32/O/N/16
to improve the cash flow.
[2]
OMAIR
MASOOD
CEDAR COLLEGE
REQUIRED
OMAIR MASOOD
CEDAR COLLEGE
[Total: 25]
(d) Calculate the required increase in February’s sales, after the advertising campaign, needed
(Nov16/P32/Q6)
to avoid the negative cash balance.
[5]
© UCLES 2016
9706/32/O/N/16
401
18
Receipts
following
sale between40
30 000
27 500
(a) (i)– month
State one
difference
a 000
cash
a statement
of cash
flows.
[1]
$ budget and
$
$
10
Payments
tobalance
suppliers
(44 000)
(33 000)
(35 750)
Opening
17
800
17
300
(1
600)
REQUIRED
Q5
(ii) State
twoofbenefits
cash
[2]
Wages
(10a000)
Receipts
– month
sale of preparing
28
500budget.(10 125)
26 125 (8 575)
30 875
6
The
directors
of
Slanting
Stores
Limited
have
prepared
a
cash
budget.
000)
(14
800)
(12
200)
Other
expenses
(15
Receipts – month following sale
40 000
30 000
27 500
(b) Additional
Calculate
000)
– 750)
Dividend
paid toinformation
– 000)
(8(33
Payments
suppliers
(44
000)
(35
REQUIRED
Purchase
non-current
– months
(9(10
100)
–(8 575)
Wages
(10
000)
125)
(i) theofvalue
ofLimited
salesasset
for
each all
of the
three
March
2017,
[3]
Slanting
Stores
makes
its sales
on
credit.
Half
of to
all
credit customers
10 January
Closing
balance
17
300
(1
600)
250200) pay in the month
Other
expenses
(15
000)
(14
800)
(12
Q5
of
receiving
a difference
cash discount
for early payment.
The aremainder
paycash
in the
following month.
(a)sale,
(i) value
State
one
budget
and
statement
flows.
(ii)
the
of
cash
discountbetween
for eachaofcash
the
months
March
[3] [1]
Dividend
paid
– three
(8January
000) toof
– 2017,
for resale
are paid
for in
the month
purchase.
6 Purchases
The directors
of Slanting
Stores
Limited
haveafter
prepared
a cash budget.
REQUIRED
Purchase of non-current asset
–
(9 100)
–
(ii)
State
two
benefits
ofgiven.
preparing a cash budget.
(iii)
the
rate
of
cash
discount
[1] [2]
Closing
balance
17
300
(1
600)
The
cash budget for the three months ending 31 March 2017 is as follows:250
(b)___________________________________________________________________________
Calculate
REQUIRED
Additional information
REQUIRED
Cash
budget
for
three
months
ending
31 March
2017
___________________________________________________________________________
(i)
value
of
sales
for the
each
of the
three
months
to
March
2017,
[3] [1]
(a) the
(i) the
State
one
difference
between
a each
cash
budget
and amonths
statement
of cash
(c) Prepare
trade
receivables
budget
for
of theJanuary
three
January
to flows.
March 2017.
Slanting
Stores
Limited
makes
all
its
sales
on
credit.
Half
of
all
credit
customers
pay
in
the
month
Trade
receivables at 1 January 2017 areJanuary
expected to beFebruary
$40 000.
[8]
(b)
Calculate
March
(ii)sale,
the
value
cash
discount
for for
each
of
the
three
months
January to
March
[3] [2]
(ii) receiving
Stateoftwo
benefits
of preparing
a cash
budget.
of
a cash
discount
early
payment.
The remainder
pay
in the2017,
following month.
___________________________________________________________________________
$
$
$
Purchases
for
resale
are
paid
for
in
the
month
after
purchase.
Additional
information
(i)
of sales
for each
three
2017,
Opening
balance
800 months January
17 300 to March
(1 600)
(iii)
the the
ratevalue
of cash
discount
given.of the17
[1] [3]
Additional
information
–budget
month
of
sale
28 500
26
30February.
875
The
cashthe
the
three
months
ending
31
March
2017
is as
follows:
The Receipts
directors
wish
tofor
eliminate
the
expected
inthree
cash
at 125
the
end
of
They are [3]
(ii)
value
of
cash
discount
for
eachdeficit
of
the
months
January
to Marchpay
2017,
Slanting
Stores
Limited
makes
all
its
sales
on
credit.
Half
of
all
credit
customers
in the month
Receipts
–
month
following
sale
40
000
30
000
27
500
___________________________________________________________________________
considering
paying
$15
000
in
January
for
an
advertising
campaign
which
is
expected
to
increase
(c) Payments
Prepare
the
trade
budget
each
of the
three
months
January
to March
2017.
of sale, receiving
areceivables
cash
discount
for for
early
payment.
The
remainder
pay
in the
following
month.
Cash
budget
for the
three
months
ending
31 March
2017 (35
to
suppliers
(44
000)
(33
000)
750)
(iii)February
the rateonwards.
of cash
discount2017
given.
sales Trade
from
receivables
at
1
January
are
expected
to
be
$40
000.
[8] [1]
Purchases
for
resale
are
paid
for
in
the
month
after
purchase.
Wages
(10
000)
(10
125)
(8
575)
___________________________________________________________________________
January
February
March
Other expenses
(15
000)
(14 800)
(12
200)
REQUIRED
Additional
information
The
cash
budget
for
the
three
months
ending
31
March
2017
is
as
follows:
$
$
Dividend
paidthe trade receivables budget for
– each of the (8
000)months January
–$
(c) Prepare
three
to March 2017.
Opening
balance
17
800
17
300
(1
600)
Purchase
of
non-current
asset
–
(9
100)
–
Trade
receivables
at
1
January
2017
are
expected
to
be
$40
000.
(d)
Calculate
the
required
increase
in
February’s
sales,
after
the
advertising
campaign,
needed
TheReceipts
directors– wish
thethree
expected
deficit
in 31
cash
at125
the
end 30
of 875
February. They
are [8]
Cashtobudget
for the
months
ending
March
2017
month
ofeliminate
sale
28 300
500
26
Closing
balance
17
(1
600)
250
to
avoid
the
negative
cash
balance.
[5]
considering
$15
000 in January
for an40
advertising
campaign
is expected
to increase
000
30 000 which 27
500
Receipts paying
– month
following
sale
Additional
information
sales
from
February
onwards.
January
February
March
___________________________________________________________________________
Payments to suppliers
(44 000)
(33 000)
(35 750)
REQUIRED
$ deficit in cash
$at the end
$ February. They are
The
directors
wish to actions
eliminate
the
expected
of
Wages
(10
000)
(10
125)
(8 575)
(e)
Suggest
two
possible
the
directors
could
take,
other
than
the
advertising
campaign,
REQUIRED
Opening
balance
17
800
17
300
(1
600)
___________________________________________________________________________
(b)
Calculate
considering
paying
000 in January for
advertising campaign
is expected to increase
(14 800) which
(12 200)
Other
expenses
(15an000)
to
improve
the
cash$15
flow.
[2]
Receipts
–
month ofonwards.
sale
28
26000)
125
30– 875
sales
frompaid
February
Dividend
– 500
(8
(d)___________________________________________________________________________
Calculate
the
required
increase
in
February’s
sales,
after
the
advertising
campaign,
needed
Receipts
monthoffollowing
40
30100)
000
27–2017,
500
(i) the
sales
forsale
each of the three
months January
to March
[3]
(9
Purchase
of– value
non-current
asset
– 000
[Total: 25]
to
avoid the
negative
cash
balance.
[5]
Payments
to
suppliers
(44
000)
(33
000)
(35
750)
REQUIRED
Closing balance
17 300
(1 600)
250
___________________________________________________________________________
(ii) the value of cash discount for each
the three months
January(8
to575)
March 2017,
[3]
Wages
(10of000)
(10 125)
(Nov16/P32/Q6)
Other
expenses
(15
000)
(14
800)
(12
200)
(d)
Calculate
the
required
increase
in
February’s
sales,
after
the
advertising
campaign,
needed
© UCLES
2016
9706/32/O/N/16
REQUIRED
(e)___________________________________________________________________________
Suggest two possible actions the directors could take, other than the advertising campaign,
(iii)
thepaid
rate
of cash discount
given.
[1]
Dividend
–
(8 000)
–
to avoid
thecash
negative
to
improve
the
flow.cash balance.
[2] [5]18
Purchase
of non-current asset
–
(9 100)
–
(b)
Calculate
___________________________________________________________________________
Closing
balance
17
300
(1
600)
250 to[Total:
25]
(c)
the
receivables
budget
for each
of take,
the three
months
January
March
2017.
(e) Prepare
Suggest
twotrade
possible
actions
directors
could
otherto
than
the
advertising
campaign,
(i) the value
of sales for
eachthe
of the
three months
January
March
2017,
[3]
Trade
receivables
at
1
January
2017
are
expected
to
be
$40
000.
[8]
___________________________________________________________________________
to improve the cash flow.
[2]
(Nov16/P32/Q6)
REQUIRED
each of the three months January to March 2017,
[3]
© UCLES 2016 (ii) the value of cash discount for9706/32/O/N/16
Additional
information
(b) Calculate
[Total: 25] 18
(iii) the rate of cash discount given.
[1]
The directors
wish to eliminate CEDAR
the expected COLLEGE
deficit in cash at the end of February. They are
(Nov16/P32/Q6)
OMAIR
(i) MASOOD
the value of sales for each
of the three months January to March 2017,
[3]
considering
paying $15 000 in January for9706/32/O/N/16
an advertising campaign which is expected to increase
© UCLES
2016
sales
fromthe
February
onwards.
(c) Prepare
the
trade
receivables
for of
each
of themonths
three months
to2017,
March 2017.
(ii)
value
of
cash
discountbudget
for each
the three
JanuaryJanuary
to March
[3] 18
Trade receivables at 1 January 2017 are expected to be $40 000.
[8]
REQUIRED
OMAIR
COLLEGE
(iii) theMASOOD
rate of cash discount CEDAR
given.
[1]
Additional information
(d) Calculate the required increase in February’s sales, after the advertising campaign, needed
avoid the
negative
cash balance.
[5]
(c)to
Prepare
the
trade
receivables
for deficit
each of
three
months
to March
The
directors
wish
to eliminate
the budget
expected
in the
cash
at the
end January
of February.
They2017.
are
Trade paying
receivables
at 1inJanuary
2017
areadvertising
expected to
be $40 000.
[8]
January
for an
campaign
which is expected to increase
considering
$15 000
___________________________________________________________________________
sales
from
February
onwards.
(e)Additional
Suggest information
two possible actions the directors could take, other than the advertising campaign,
to
improve
the cash flow.
[2]
___________________________________________________________________________
REQUIRED
The directors wish to eliminate the expected deficit in cash at the end of February. They are
[Total:
25]
considering
$15 000
in January
for an advertising
campaign
which is expected
to needed
increase
(d)
Calculatepaying
the required
increase
in February’s
sales, after
the advertising
campaign,
___________________________________________________________________________
sales
from
February
onwards.
to avoid the negative cash balance.
[5]
(Nov16/P32/Q6)
OMAIR MASOOD
CEDAR COLLEGE
___________________________________________________________________________
9706/32/O/N/16
© UCLES 2016
REQUIRED
(e) Suggest two possible actions the directors could take, other than the advertising campaign,
(d)toCalculate
the cash
required
in February’s
sales, after the advertising campaign, needed
improve
the
flow.increase
[2]
OMAIR
MASOOD
CEDAR
COLLEGE
to avoid the negative cash balance.
[5]
[Total: 25]
___________________________________________________________________________
(e) Suggest two possible actions the directors could take, other than the advertising campaign,
(Nov16/P32/Q6)
to improve the cash flow.
[2]
© UCLES
2016
9706/32/O/N/16
___________________________________________________________________________
OMAIR MASOOD
(Nov16/P32/Q6)
© UCLES 2016
OMAIR MASOOD
OMAIR MASOOD
CEDAR COLLEGE
9706/32/O/N/16
CEDAR COLLEGE
CEDAR COLLEGE
[Total: 25]
18
18
18
402
Q6.
Q6
6
9
Sunil is preparing the annual budgets for his manufacturing business.
REQUIRED
(a) Explain what is meant by a master budget.
[2]
9
Q6
Additional information
6 ___________________________________________________________________________
Sunil is preparing the annual budgets for his manufacturing business.
The finished goods inventory held at 1 January 2017 is expected to be 200 units. This is
___________________________________________________________________________
REQUIRED
expected
to increase by 20 units each month until 31 March 2017.
(a) Explain
what
is meant 2016
by a master
[2]
___________________________________________________________________________
Unit
sales from
December
to April budget.
2017 are expected to be:
Additional
information
December
January
February
March
April
350
370
410
380
430
The finished goods inventory held at 1 January 2017 is expected to be 200 units. This is
expected to increase by 20 units each month until 31 March 2017.
REQUIRED
9 four
Unit Prepare
sales from
Decemberbudget
2016 tofor
April
2017
are
expected
to from
be: January to April 2017.
(b)
a production
each
of the
months
Q6
[4]
6
Sunil
is preparing
the
annual budgets
for his manufacturing
December
January
February
March business. April
Additional
information
350
370
410
380
430
1REQUIRED
Goods will be sold on credit with a selling price of $30 per unit. One third is expected to be
REQUIRED
received in the month of sale with the balance being received in the following month.
(a) Explain what is meant by a master budget.
[2]
Prepare
a production
budget
of the
four months
January to
2017.
[4]
2(b) Other
income
will arise
from for
theeach
interest
received
on anfrom
investment
of April
$50 000
at 4% per
Additional
annum.information
Interest will be received quarterly starting 1 January 2017.
Additional information
___________________________________________________________________________
finished
goods
held toatbe1 as
January
3The Unit
product
costsinventory
are expected
follows:2017 is expected to be 200 units. This is
expected
to will
increase
by on
20 credit
units each
until
31 of
March
1 Goods
be sold
with amonth
selling
price
$30 2017.
per unit. One third is expected to be
___________________________________________________________________________
received in the month of sale
$ with the balance being received in the following month.
Unit Direct
sales from
December 2016
materials
7 to April 2017 are expected to be:
___________________________________________________________________________
2 Direct
Other labour
income will arise from
5 the interest received on an investment of $50 000 at 4% per
December
February
annum. InterestJanuary
will be received
quarterly startingMarch
1 January 2017.April
Overheads
6
___________________________________________________________________________
350
370
410
380
430
18
3 Unit product costs are expected to be as follows:
___________________________________________________________________________
4REQUIRED
Direct materials will be purchased to meet the current month’s production. Half the amount
due will be paid by cash $in the month of production and the balance will be paid in the
(b) following
Prepare
amonth.
production
budget
eachproduced
of the fourinmonths
from2016
January
to April 2017.
___________________________________________________________________________
Direct materials
7 for
The number
of units
December
is expected
to be 340. [4]
Direct labour
5
information
Overheads
5Additional
Direct
labour
will be paid in6the month that the cost is incurred.
18
Goods will of
bethe
soldoverheads
on credit with
a selling
$30 per
unit. One
is expected
be
61 Four-fifths
will be
paid inprice
the of
month
in which
they third
are incurred
withtothe
received
in thepaid
month
ofpurchased
sale
with the
received
in the
followingHalf
month.
4 balance
Direct materials
willinbe
to balance
meet thebeing
current
month’s
production.
the amount
being
the
following
month.
due will be paid by cash in the month of production and the balance will be paid in the
Other
income
willThe
arise
the
interest
received
an investment
at340.
4%
following
month.
number
of
units
produced
in December
2016
is expected
to
72 Some
new
equipment
is from
expected
to be
acquired
onon
1 January
2017
atofa $50
cost000
ofbe
$12
000.per
A
annum.
Interest
received
quarterly
starting
1 Januarybeing
2017.paid on 1 April 2017. This
50%
deposit
willwill
bebe
paid
on delivery,
with
the remainder
5 equipment
Direct labour
paid in theatmonth
that the
is incurred.
willwill
bebe
depreciated
10% using
thecost
straight-line
method.
3 Unit product costs are expected to be as follows:
10
Four-fifths
of the overheads
be paid
in the
month intowhich
they arebyincurred
86 The
bank account
balance at 1will
January
2017
is expected
be overdrawn
$10 450.with the
$
balance being paid in the following
month.
REQUIRED
Direct materials
7
labour
5
7(c) Direct
Some
new
equipment
is
expected
acquired
onfrom
1 January
2017
at a cost
of $12 000.
A
Prepare a cash budget for each of to
thebe
three
months
January
to March
2017.
[10]
Overheads
50% deposit will be paid 6
on delivery, with the remainder being paid on 1 April 2017. This
18 at 10% using the straight-line method.
equipment will be depreciated
10 using a bank overdraft.
(d) Analyse the options available to Sunil to avoid
[6]
4
Direct
materials
will
be purchased
to meet
current month’s
production.
8 The
bank
account
balance
at 1 January
2017the
is expected
to be overdrawn
byHalf
$10 the
450.amount
due will be paid by cash in the month of production and the balance will be paid in the
REQUIRED
following month. The number of units9706/33/O/N/16
produced in December 2016 is expected to be
340.over
© UCLES 2016
[Turn
(e) Advise Sunil whether or not he should apply for a loan rather than maintain an overdraft.
(c) Justify
Prepare
a cash
budget for each of the three months from January to March 2017.
[10]
your
answer.
5 Direct labour will be paid in the month that the cost is incurred.
[3]
6 Four-fifths of the overheads will be paid in the month in which they are incurred with the
(d) Analyse the options available to Sunil to avoid using a bank overdraft.
[6]
[Total: 25]
balance being paid in the following month.
(Nov16/P33/Q6)
over
new equipment is expected to9706/33/O/N/16
be acquired on 1 January 2017 at a cost of [Turn
$12 000.
A
(e) AdviseMASOOD
Sunil whether or not he should
apply forCOLLEGE
a loan rather than maintain an overdraft.
OMAIR
CEDAR
50% deposit will be paid on delivery, with the remainder being paid on 1 April 2017. This
© UCLES
7 2016
Some
Justify your answer.
equipment will be depreciated at 10% using the straight-line method.
[3]
10
8 The bank account balance at 1 January 2017 is expected to be overdrawn by $10 450.
[Total: 25]
REQUIRED
OMAIR MASOOD
CEDAR COLLEGE
403
19
4
Direct materials will be purchased to meet the current month’s production. Half the amount
due will be paid by cash in the month of production and the balance will be paid in the
following month. The number of units produced in December 2016 is expected to be 340.
5
Direct labour will be paid in the month that the cost is incurred.
6
Four-fifths of the overheads will be paid in the month in which they are incurred with the
balance being paid in the following month.
7
Some new equipment is expected to be acquired on 1 January 2017 at a cost of $12 000. A
50% deposit will be paid on delivery, with the remainder being paid on 1 April 2017. This
equipment will be depreciated at 10% using the straight-line method.
10
8 The bank account balance at 1 January 2017 is expected to be overdrawn by $10 450.
REQUIRED
(c) Prepare a cash budget for each of the three months from January to March 2017.
[10]
___________________________________________________________________________
(d) Analyse the options available to Sunil to avoid using a bank overdraft.
[6]
___________________________________________________________________________
9706/33/O/N/16
[Turn over
(e) Advise Sunil whether or not he should apply for a loan rather than maintain an overdraft.
© UCLES 2016
___________________________________________________________________________
Justify your answer.
[3]
___________________________________________________________________________
[Total: 25]
___________________________________________________________________________
(Nov16/P33/Q6)
___________________________________________________________________________
OMAIR MASOOD
CEDAR COLLEGE
___________________________________________________________________________
19
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
© UCLES 2016
OMAIR MASOOD
9706/33/O/N/16
CEDAR COLLEGE
404
50% deposit will be paid on
$ delivery, with the remainder being paid on 1 April 2017. This
at 10%
using
the straight-line
1 equipment
Goods
will be
bedepreciated
sold on7 credit
with
a selling
price of method.
$30 per unit. One third is expected to be
Direct
materials
received
10 balance being received in the following month.
Direct
labourin the month5of sale with the
8 The
bank account balance 6at 1 January 2017 is expected to be overdrawn by $10 450.
Overheads
REQUIRED
18 from the interest received on an investment of $50 000 at 4% per
2 Other income will arise
annum. Interest will be received quarterly starting 1 January 2017.
(c)
a cash budget
each of the
three the
months
from
Januaryproduction.
to March 2017.
[10]
4 Prepare
Direct materials
will be for
purchased
to meet
current
month’s
Half the amount
due
will
be
paid
by
cash
in
the
month
of
production
and
the
balance
will
be
paid
in
the
3 Unit product costs are expected to be as follows:
following month. The number of units produced in December 2016 is expected to be 340.
(d) Analyse the options available to Sunil to avoid using a bank overdraft.
[6]
$
5 Direct labour will be paid in the month
that the cost is incurred.
Direct materials
7
9706/33/O/N/16
[Turn over
___________________________________________________________________________
DirectSunil
labour
(e)
or not will
he5 should
formonth
a loaninrather
an overdraft.
6 Advise
Four-fifths
of whether
the overheads
be paidapply
in the
whichthan
they maintain
are incurred
with the
© UCLES 2016
Justify
your
answer.
Overheads
6 month.
balance
being
paid in the following
___________________________________________________________________________
[3]
18
7
Some new equipment is expected to be acquired on 1 January 2017 at a cost of $12 000. A
___________________________________________________________________________
[Total:This
25]
deposit
will be will
paidbe
on purchased
delivery, with
remainder
beingmonth’s
paid on 1
April 2017.
4 50%
Direct
materials
to the
meet
the current
production.
Half
the amount
equipment
will
be
depreciated
at
10%
using
the
straight-line
method.
(Nov16/P33/Q6)
due
will
be
paid
by
cash
in
the
month
of
production
and
the
balance
will
be
paid in the
___________________________________________________________________________
10 produced in December 2016 is expected to be 340.
following month. The number of units
8 The bank account balance at 1 January 2017 is expected to be overdrawn by $10 450.
___________________________________________________________________________
REQUIRED
5 Direct labour
will be paid in theCEDAR
month that the
cost is incurred.
OMAIR
MASOOD
COLLEGE
19
___________________________________________________________________________
(c) Prepare a cash budget for each of the three months from January to March 2017.
[10]
6
Four-fifths of the overheads will be paid in the month in which they are incurred with the
balance being paid in the following month.
___________________________________________________________________________
(d) Analyse the options available to Sunil to avoid using a bank overdraft.
[6]
___________________________________________________________________________
7 Some new equipment is expected to be acquired on 1 January 2017 at a cost of $12 000. A
50% deposit will be paid on delivery,
with the remainder being paid on
1 April
9706/33/O/N/16
[Turn
over 2017. This
(e) Advise
Sunil whether
or not he should
apply
for athe
loan
rather thanmethod.
maintain an overdraft.
equipment
will be depreciated
at 10%
using
straight-line
Justify your answer.
10
[3]
© UCLES 2016
8 The bank account balance at 1 January 2017 is expected to be overdrawn by $10 450.
REQUIRED
[Total: 25]
___________________________________________________________________________
(Nov16/P33/Q6)
(c) Prepare a cash budget for each of the three months from January to March 2017.
[10]
___________________________________________________________________________
___________________________________________________________________________
OMAIR
MASOOD
COLLEGE
(d) Analyse
the options available CEDAR
to Sunil to avoid
using a bank overdraft.
[6]
19
___________________________________________________________________________
© UCLES 2016
9706/33/O/N/16
[Turn over
(e) Advise Sunil whether or not he should apply for a loan rather than maintain an overdraft.
___________________________________________________________________________
Justify your answer.
[3]
___________________________________________________________________________
[Total: 25]
(Nov16/P33/Q6)
OMAIR MASOOD
© UCLES 2016
OMAIR MASOOD
© UCLES 2016
CEDAR COLLEGE
9706/33/O/N/16
CEDAR COLLEGE
9706/33/O/N/16
405