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Sir, I watched your lecture on budgeting but you did not give any example on rolling budgets in the video nor in the notes. Although you did not say much on that it gave me a feeling that they don’t come often in the exam.
If they can come in the exam could you please give me an example how to make them?
I explain how a rolling budget is prepared even though there is not an example.
The exam does not often ask for the preparation of a rolling budget, but it could do. You will find examples in your Revision Kit.
Can you please help me with the Rolling budget question Static Co (Dec 2016)
First, we must calculate the growth rate of everything so that we can easily adjust the growth for the coming period by calculating the actual activity and multiplying it with the growth rate?
Revenue = 13694 / 13425 = 2% growth every quarter
Do I have to calculate every quarter growth or do we just have to calculate the first quarter growth because it is possible that the growth rate increases in any quarter?Cost of Sales = 8216 / 8055 = 2%
Distribution cost = 685 / 671 = 2%
Is it true that Distribution cost would remain fixed % of revenue in the question therefore we have to calculate like this by taking distribution cost divided by revenue each year otherwise it would have been calculated just like the growth (685 / 671) = 2%Administration cost = 2000 fixed every quarter
Since the actual results for the first quarter (Q1) is already given in the question so we start calculating Q2 actual result with the growth rate and multiply it with Q1 actual results?
Are these all correct?
Revenue:
Although in real life the growth rate could change, the question says that the budget was based on the same volume growth rate each quarter (which turns out to be 2% whichever two quarters you look at) and also says that the assumptions in the budget (so including a 2% volume growth) were correct.
Distribution costs:
What you write is correct.
Administration costs:
Since the actual cost in quarter 1 was 2,020, we will revise the budget to be 2,020 in each quarter.
Have you checked with the printed answer?
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