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Hello! The question goes:
“Mr Grob started trading in 20X3, selling one product on credit. The following budgeted information for 20X4 has been gathered:
Credit sales:
Jan 20X4: $12,000
Feb 20X4: $15,000
Mar 20X4: $21,000Receivables have recently been settling their debts 50% in the month following sale, and 50% two months after sale. A promp payment discount of 3% is offered to those receivables paying within one month.
The gross profit margin is expected to be 25%. Due to an anticipated continued increase in sales, Mr Grob intends to increase inventory levels in March 20X4 by $2,000, and it is intended that the payables balance is increased by $3,000 to ease cash flows in the same month.Calculate the budgeted payment to suppliers in March 20X4.”
I can’t at all see how to get to this payment to suppliers. Please help! Thank you!
Surely the book in which you found the question also contains the answer.
Please say which part of the answer you are not clear about and I will try and help.
Sorry! The answer just says:
$21,000 x 0.75 + $2,000 – $3,000 = $14,750It’s the $21,000 x 0.75 I don’t understand.
Thank you!
It is because the sales include a profit of 25%. So the cost of the sales will be 21,000 – (25% x 21,000) = 75% x 21,000.
It is the cost of the goods that is relevant when calculated how much was paid for the goods to the suppliers.Good evening Sir,
Can you please help me with this question? i never came across a question where there is both kg and units,,.. but only those of units ! 🙂A company manufactures and sells one product which requires 8 kg of raw materials in its manufacture. The budgeted data relating to the next period are as follows:
units
Sales 19,000
Opening inventory 4,000
Closing inventory 3,000opening inventory of raw materials 50,000 kg
closing inventory of raw materials 53,000 kgWhat is the budgeted raw material purchases for next period ? ______ kg : Correct answer is 147,000 kg . (taken from online mock exams)
My workings : Production budget Units kg
Sales budget 19,000 19,000
+ closing inventory 3,000 53,000
– opening inventory (4,000) (50,000)
_______ _______
Budgeted production in units/kg : 18,000 22,000
_______ _______
Do i have to use the materials purchases budget also Sir ? 🙂Thank You 🙂
You have first of all to work out how many units are produced, which is indeed 18,000.
Since each unit requires 8kg of material, they need to use 18,000 x 8kg = 144,000 kg.
Because of the opening and closing inventories of materials, the amount of materials that needs to be purchased is 144,000 – 50,000 + 53,000 = 147,000 kg.
(If you have not see this sort of problem before, then you have obviously not watched the free lecture on budgeting 🙂 )
I will definitely watch the free lectures Sir ! Thank You very much for your Precious help ! 🙂
Hello! The question goes:
“Mr Grob started trading in 20X3, selling one product on credit. The following budgeted information for 20X4 has been gathered:
Credit sales:
Jan 20X4: $12,000
Feb 20X4: $15,000
Mar 20X4: $21,000Receivables have recently been settling their debts 50% in the month following sale, and 50% two months after sale. A promp payment discount of 3% is offered to those receivables paying within one month.
The gross profit margin is expected to be 25%. Due to an anticipated continued increase in sales, Mr Grob intends to increase inventory levels in March 20X4 by $2,000, and it is intended that the payables balance is increased by $3,000 to ease cash flows in the same month.Calculate the budgeted payment to suppliers in March 20X4.”
Sir I am Not able to Understand Why 3000 is subtracted ??John Moffat wrote:It is because the sales include a profit of 25%. So the cost of the sales will be 21,000 – (25% x 21,000) = 75% x 21,000.
It is the cost of the goods that is relevant when calculated how much was paid for the goods to the suppliers.Why 3000 is subtracted??
If the amount owing to payables increases by 3,000 then it must mean that we have paid them 3,000 less than the amount we purchased from them.
A company manufactures a single product, M. Budgeted production output of product M during August is 200 units. Each unit of product M requires 6 labour hours for completion and PR Co anticipates 20 per cent idle time. Labour is paid at a rate of $7 per hour. What is the direct labour cost budget for August?
The answer states that “allowance for idle time (20% of total time = 25% of active time)”
Can I know how they state that “20% of total time = 25% of active time”
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