• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for March and June 2025 exams.
Get your discount code >>

Budget

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Budget

  • This topic has 4 replies, 3 voices, and was last updated 4 years ago by John Moffat.
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • January 7, 2019 at 6:19 am #500238
    lily1996
    Member
    • Topics: 28
    • Replies: 33
    • ☆☆

    ABC Ltd wants to prepare operating budget for the coming period (Feb 2015). The company have collected the following information regarding products, costs and sales level as followed:

    Products A B
    Material X(kg) 4 5
    Material Y (litres) 1 3

    Labour Hours required
    Skilled (hours) 5 3
    Semi-skilled (hours) 2 5

    Sales level (units) 5000 6000
    Opening inventory (units) 500 650
    Opening inventory for material 8000kg 10,000 litres
    Material prices for X is $4 per kg and for Y $3 per litre
    Labour costs are $12 per hour for skilled labour and $7.50 for semi-skilled labour.

    Closing inventory of finished good will be sufficient to meet 15% of the current period’s sales demand. Closing inventory of materials should be sufficient to meet 20% of the current period’s production demand.

    Required:
    Prepare the following budget:
    (a) Production budget
    (b) Material usage budget (kg & litre)
    (c) Material Purchases budget (kg, litre and $)
    (d) Labour budget

    I would like to ask the closing inventory of materials should be sufficient to meet 20% of current period’s production demand is means using (production volume of finished goods X 20%) or (production volume of material X 20%) to find the closing inventory for material???

    Tq u a lot

    January 7, 2019 at 8:29 am #500248
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54670
    • ☆☆☆☆☆

    The material needed for production volume of finished goods x 20%

    November 4, 2020 at 12:21 am #594005
    gmarina81
    Member
    • Topics: 0
    • Replies: 2
    • ☆

    ABC Ltd Functional Budgets

    ABC Ltd manufactures three products for the building industry. Budgeted sales of the products A, B and C are as follows:

    Product Quantity price/unit £ Opening stock
    A 4000 180 800
    B 6000 190 2000
    C 7000 200 2500

    Materials information

    Components M1 M2 M3 M4
    Unit cost £2 £3 £4 £5
    Quantities/unit
    A 5 3 1 2
    B 4 4 2 3
    C 3 2 1 5
    Opening stock 40000 20000 10000 30000

    Labour information
    Fitters Machinists
    Hourly rate £13.50 £12.50
    Hours per unit A 3 1.5
    Hours per unit B 4 2
    Hours per unit C 5 2.5

    The company plans an increase of 10% in the quantities of finished stocks held at the end of the budget period, and a reduction of 20% in the quantities of component stocks.

    Production overheads amount to £87,948 absorbed using total direct labour hours for production.
    Selling and distribution overheads total £652,000 absorbed as a percentage of total sales volume.

    Required:
    Prepare the budgets
    Sales
    Production
    Material usage and purchases
    Labour utilisation
    Budgeted profit statement

    I have an issue with the last task Budgeted profit statement

    ABC Ltd-Functional Budget

    Sales Budget Quantity Price £ Budgeted Sales £
    A 4,000 180 720,000
    B 6,000 190 1,140,000
    C 7,000 200 1,400,000
    3,260,000

    Production Budget
    Products A B C
    Budgeted Sales 4,000 6,000 7,000
    Opening Stock 800 2,000 2,500
    3,200 4,000 4,500
    Budgeted closing stock 880 2,200 2,750
    Production Budget 4,080 6,200 7,250

    Material requirement Budget
    Budgeted Production M1 M2 M3 M4 Total
    A 20,400 12,240 4,080 8,160
    B 24,800 24,800 12,400 18,600
    C 21,750 14,500 7,250 36,250
    Total material required 66,950 51,540 23,730 63,010

    A B C Total
    M1 £40,800 £49,600 £43,500 £133,900
    M2 £36,720 £74,400 £43,500 £154,620
    M3 £16,320 £49,600 £29,000 £94,920
    M4 £40,800 £93,000 £181,250 £315,050
    £134,640 £266,600 £297,250 £698,490

    Material Purchasing budget
    Required for production 66,950 51,540 23,730 63,010
    Opening Stock 40,000 20,000 10,000 30,000
    26,950 31,540 13,730 33,010
    Budgeted closing stock 32,000 16,000 8,000 24,000
    Budgeted material purchases 58,950 47,540 21,730 57,010

    Budgeted material purchases 58,950 47,540 21,730 57,010
    Cost per unit £ 2 3 4 5
    Budgeted mat. Purchases £117,900 £142,620 £86,920 £285,050 £632,490

    Labour requirement Budget
    Budgeted production 4,080 6,200 7,250
    Product A B C Total Rate Budget Lab. Cost
    Fitters 12,240 24,800 36,250 73,290 £13.50 £989,415
    Machinists 6,120 12,400 18,125 36,645 £12.50 £458,063
    Total Budgeted labour cost 18,360 37,200 54,375 109,935 £1,447,478

    Fitters £165,240 £334,800 £489,375 989,415
    Machinists £76,500 £155,000 £226,563 458,063
    £241,740 £489,800 £715,938 1,447,478

    Budgeted production overhead £87,948

    A B C Total
    Budgeted production 4,080 6,200 7,250 17,530
    Total hours 18,360 37,200 54,375
    OAR 0.8 0.8 0.8
    Allocated production O/H £14,688 £29,760 £43,500 £87,948

    Overhead absorption rate £0.80

    Selling & distn. Budget £652,000

    Sales O/H absorption Allocation
    A 720,000 22.1% £144,000
    B 1,140,000 35.0% £228,000
    C 1,400,000 42.9% £280,000
    3,260,000 100.0% £652,000

    Budgeted Profit Statement
    A B C Total
    Sales 720,000 1,140,000 1,400,000 3,260,000

    Cost of sale
    Material cost £134,640 £266,600 £297,250 £698,490
    Labour £241,740 £489,800 £715,938 £1,447,478
    Production overheads £14,688 £29,760 £43,500 £87,948
    Cost of sale £391,068 £786,160 £1,056,688 £2,233,916

    Gross Profit £328,932 £353,840 £343,313 £1,026,085
    Selling and distribution cost £144,000 £228,000 £280,000 £652,000
    Budgeted net profit £184,932 £125,840 £63,313 £374,085

    November 4, 2020 at 12:31 am #594006
    gmarina81
    Member
    • Topics: 0
    • Replies: 2
    • ☆

    I need to know if in my Budgeted statement when I calculate the
    Material cost I should use sold quantity of 4000 * material cost per unit
    or I should use the produced quantity 4300 * material cost per unit

    Labour I should use the labour hours needed to produce the sold quantity of 4000 * labour rate
    or I should use the labour hours needed to produce the quantity 4300 * labour rate

    Production overheads I should use the labour hours needed to produce the sold quantity of 4000 * overhead cost per hour
    or I should use the labour hours needed for produced hours for 4300 * overhead cost per hour
    Please help me with it.

    November 4, 2020 at 1:16 pm #594047
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54670
    • ☆☆☆☆☆

    Surely you have an answer to this question in the same book in which you found the question? In future please ask about whatever it is in the answer that you are not clear about.

    In the budgeted profit statement you need the cost of goods sold, which is the opening inventory of finished goods, plus the cost of the goods produced, less the closing inventory of finished goods.

  • Author
    Posts
Viewing 5 posts - 1 through 5 (of 5 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • John Moffat on The Statement of Financial Position – ACCA Financial Accounting (FA) lectures
  • Bainamura on The Statement of Financial Position – ACCA Financial Accounting (FA) lectures
  • kadamova.f@gmail.com on Associates (IAS 28) – PUPs – ACCA Financial Reporting (FR)
  • kadamova.f@gmail.com on Associates (IAS 28) – PUPs – ACCA Financial Reporting (FR)
  • bpop on Risk and uncertainty (part 2) – ACCA (AFM) lectures

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in