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I am having a problem with rolling budget question (static co – dec 2016)
In rolling budget we need to calculate the growth of sales, gross profit margin, distrubution cost and administration cost from budgeted figures and adjust the growth in actual result of quarter 1 which helps us calculate the actual results of Q2, Q3, Q4 and the Q1 (of next year) which will complete the four quarters we need to budget for.
But I am confused by the answer in my kit which says that GPm will need to take from actual result of Q1 and not from budgeted figure (I am confused why?)
Please do advice what i said in my first paragraph on how to calculate rolling bidget is correct or not?
Your first paragraph is correct, but subject to the information and instructions in the question.
In Static, the question says that Q1 is different from budget because of incorrect forecasting of prices. So the revenue in the rolling budget is based on Q1’s revenue.
The question also says that the four assumptions are correct, and so they will all apply. However since the original revenue that was budgeted was wrong, it is the GP from quarter 1 and the % of distribution costs in Q1 that will apply for the further quarters.
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