- This topic has 1 reply, 2 voices, and was last updated 1 month ago by
.
- Posts
hello sir
could you explain the question (a) note 1 and 3 only?i think the incremental budget is based on the previous year’s actual results but
i don’t know why less $14000 and captial expenditure $65000 is not includedThe important thing to realise is that you are doing a budget for 2014. What is relevant to this year?
Note 1
The repairs and maintenance costs are $30,000 with 3% growth so $30,000 * 1.03 = $30,900 these carried out each year, so are relevant to the budget year ended 31 May 2014.The $14,000 was a one-off cost so effectively a sunk, past cost in 2013, this is not relevant for the budget year ended 31 May 2014.
Note 3
The actual costs of $65,000 are a sunk cost form 2013.The canteen is being improved by investments. They are unclear about the cost so have given it a 70% chance of costing 145000 and a 30% chance of being 80000.
So, you take 0.7 * $145,000 and add that to 0.3 * $80,000 which gives $125,500.
- You must be logged in to reply to this topic.