- This topic has 27 replies, 3 voices, and was last updated 8 years ago by
.
- Posts
Dear sir,
Is there any example on cash budget in the free lecture notes?Thanks.
1.Budgeted sales of x is 18,000 units.
At the end of the production process for x, 10% of production units are scrapped as defective.
Opening inventory are budgeted to be 15,000 units
Closing inventory are budgeted to be 11,400 unitsThe answer in the BPP book is D, 16,000 units
-“10% of production units are scrapped as defective.” What does this mean and how to deal with that?
– How did they obtain the answer?2.Budgeted production in a factory for next period is 4,800 units. Each unit requires 5 labour hour to make. Labour is paid $10 per hour. Idle time represents 20% of the total labour time. What is the budgeted total labour cost for the next period?
The answer is D, $300,000
-“Idle time represents 20% of the total labour time.” What does this mean and how to deal with that?
-How did they obtain the answer?1. They need good production of 18,000 – 15,000 + 11,400 = 14,400 units.
Since 10% are scrapped, the good production must be 90% of the total production.
So the total production = 14,400 / 90% = 16,000 units.2. Since 20% of the time paid is idle (i.e. not working) only 80% is actually working.
Therefore to have 5 hours working, they need to pay for 5/80% = 6.25 hours for every unit.
So each unit costs 6.25 x $10 = $62.50.Dear sir,
I do have watched your free lectures. Can you briefly,in wordings, explain why, concerning material and production budget closing stock is added and opening stock is subtracted?If you expect to sell 1,000 units and there is no change in inventory, then you will obviously produce 1,000 units.
If however you expect to sell 1,000 units and also intend to increase your inventory by 100 units, then you need to produce 1,100 units. (the 100 increase in inventory is adding the closing inventory and subtracting the opening inventory).Knowledge of what it is is in the syllabus (and is covered in my free lectures).
You cannot be asked to prepare one.Dear sir,
1.In the BPP book, the word ‘no production resource limitations’ is mentioned.
What does this mean?2.What is a fixed budget?
3.What is ‘budget cost allowance’?
1. It means there is no limit on the number of units that they can produce.
2. It is explained in my free lectures ( in the lecture “budgeting; example 2”)
3 “budget cost allowance” is not a standard term, so it depends on the context in which it is written.
1.Raw materials=3kg at $2 per kg
Direct labour= 4hrs at $7 per hourProduction units:
May is 8,400
June is 8,200Opening inventory of Raw materials is:
May 4,200 kg
June 4,100 kgClosing inventory of Raw materials is:
June is 3,900 kgwhat is the figure included in the cash budget for June for payment for purchases?
-In the BPP book, in the answer, there is a comment where it says that “Payment in June will be in respect of May purchases.” Why so because in the question nowhere it is mentioned that purchases made in May will be paid in June. Could you help me please?
2. Budget production:
-2,000 units
-3,000 unitsProduction cost:
$11,100
$12,900What is the budget allowance for an activity level of 4,000 units?
-Could explain what this allowance means and also give me the answerThanks.
1. I have the question in the BPP book in front of me, and it clearly states “Material purchases are paid for in the month after purchase”
2. What they want is to know how many $’s you would budget for production of 4,000 units. You need to use the high low method, and the answer must be in your book.
A company anticipates that 10000 units of product z will be sold during January . Each unit z requires 2 litres of raw material w . Actual stocks as of 1 January and budieted inventories as of 31 January are as follows:
1 January 31 Jan.
Product z( units) 14000 12000Raw material w (litres)20000 15000
Cost of 1 litre of w $4.
If the company pays for all purchases in the month of acquisition , what is the cash outlay for January purchase of w?Please do not simply set test questions here and expect an answer.
You must have an answer in the same book in which you found the question, and you should ask about whatever is causing you a problem understanding the answer.
You need to adjust the sales of Z by the opening and closing inventories of Z in order to find out how many units are actually produced.
You then multiply by 2 to determine how many litres of W are needed for the production.
You then adjust this by the opening and closing inventory of W to calculate how many litres are purchased.
Multiplying this by $4 gives you the cash outlay.Have you watched my free lectures on budgeting?
(Our lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well)
J makes component M uses 3 kg of raw materials of X
-Opening inventory of raw material x is 5,000 at $4
Opening inventory of component M is 3,000 unitsBudgeted sales are expected to be 48,000 units(occurring eventually during the year)
-closing inventory of raw material x is one month worrth’s of production
closing inventory of component M is two month worth of sales-What is the material purchase budget in $?
In the BPP book, the answer is 162,000 kg
How to obtain the answer?
Working done in the book are done without any explanation; making it difficult to understand how to obtain certain figureQ manufactures a single product and an extract from it’s flexed budget for production cost is as follows:
-Activity level 80%
Direct material $2,400
Labour $2120
Production overhead $4,060-Activity level 90%
Direct material $2,700
Labour $2,160
Production overhead $4,080What would the total cost allowance be in a budget at 83% level of activity?
The answer is $8,688-What does “cost allowance be in a budget”?
-How to obtain the answer?Material is a variable cost and so you can calculate the cost per %.
Labour and overheads are both semi-variable and so you can use the high-low method to calculate the variable cost per % and the fixed cost.
Then you can calculate what the total costs will be at the budgeted 83% – this is the total cost that you will put in the budget (which is what the cost allowance will be in the budget).
Dear sir,
Concerning flexed and actual budget, when we use the absorption costing approach, we value inventory at standard cost.
If we use a marginal costing approach, then how we would value inventory?(in the flexed and actual budget)With absorption costing we value at the standard absorption cost.
When using marginal costing we value the inventory at the standard marginal cost.
- You must be logged in to reply to this topic.