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budgeting

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › budgeting

  • This topic has 3 replies, 2 voices, and was last updated 3 years ago by AvatarJohn Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • August 22, 2022 at 3:02 pm #663943
    AvatarSukuna
    Participant
    • Topics: 25
    • Replies: 37
    • ☆☆

    Each unit of product Zeta requires 3 kg of raw material and 4 direct labour hours. Material costs $2 per kg and
    the direct labour rate is $7 per hour.
    The production budget for Zeta for April to June is as follows.

    April May June
    Production units 7,800 8,400 8,200

    16.17 Raw material opening inventories are budgeted as follows.
    April May June
    3,800 kg 4,200 kg 4,100 kg

    The closing inventory budgeted for June is 3,900 kg.

    Material purchases are paid for in the month following purchase. What is the figure to be included in the cash budget for June in respect of payments for purchases?

    My working:

    production requirement 8400X3kg = 25,200
    closing inventory – 3900
    less opening inventory – 4200

    which gives us 24,900.

    But they used a different figure (4100) in closing inventory and I don’t get it why is that so… why they used 4200 instead of 3900? when this figure (closing inventory) is already given? “The closing inventory budgeted for June is 3,900 kg. “

    August 22, 2022 at 4:17 pm #663949
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54836
    • ☆☆☆☆☆

    Given that the cash paid in June is for May purchases, it is the opening and closing inventory for May that is relevant.

    August 23, 2022 at 8:53 am #664006
    AvatarSukuna
    Participant
    • Topics: 25
    • Replies: 37
    • ☆☆

    Thank you, sir.

    August 23, 2022 at 11:41 am #664035
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54836
    • ☆☆☆☆☆

    You are welcome.

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘budgeting’ is closed to new replies.

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