A B C D F G
1 Jan Feb Mar Apr May
2 Sales 15,000 13,400 16,100 17,200 15,300 3 Cost of sales 11,090 10,060 12,040 13,000 11,100 4 Gross profit 3,910 3,340 4,060 4,200 4,200 5 Expenses 1,500 1,500 1,500 1,500 1,500 6 Net profit 2,410 1,840 2,560 2,700 2,700 7 8 Net profit %
15.5 The formula =C2-C3 will give the contents of which cell? A C6
B C4 C C5
D C1 (2 marks)
15.6 What would be the formula for March net profit? A =D2–D3
B =B6+C6 C =D4–D5
D =D3*D8 (2 marks)
15.7 What will be the formula to go in G8? A =G6/G2*100
B =G4/100*G6 C =G2/G6*100
D =G6/G4*100 (2 marks)
15.8 A company manufactures a single product. In a computer spreadsheet the cells F1 to F12 contain the budgeted monthly sales units for the twelve months of next year in sequence, with January sales in cell F1 and finishing with December sales in F12. The company policy is for the closing inventory of finished goods each month to be 10% of the budgeted sales units for the following month.
Which of the following formulae will generate the budgeted production (in units) for March next year? A =[F3 + (0.1*F4)]
B =[F3 – (0.1*F4)]
C =[(1.1*F3) – (0.1*F4)]
D =[(0.9*F3) + (0.1*F4)] (2 marks)
15.9 Misty Co's budgetary control report for last month is as follows:
Fixed budget Flexed budget Actual results
$ $ $
Direct costs 61,100 64,155 67,130
Production overhead 55,000 56,700 54,950 Other overhead 10,000 10,000 11,500 126,100 130,855 133,580 What was the volume variance for last month?
A $4,755 (A) B $2,725 (A) C $4,755 (F)
D $2,725 (F) (2 marks)
15.10 Misty Co's budgetary control report for last month is as follows:
Fixed budget Flexed budget Actual results
$ $ $
Direct costs 61,100 64,155 67,130
Production overhead 55,000 56,700 54,950 Other overhead 10,000 10,000 11,500 126,100 130,855 133,580 What was the expenditure variance for last month?
A $7,480 (F) B $2,725 (F) C $7,480 (A)
D $2,725 (A) (2 marks)
16 The budgetary process
62 mins
16.1 What does a master budget comprise?
A The budgeted statement of profit or loss
B The budgeted cash flow, budgeted statement of profit or loss and budgeted statement of financial position
C The budgeted cash flow
D The entire set of budgets prepared (2 marks)
16.2 Which of the following is NOT a functional budget? A Production budget
B Distribution cost budget C Selling cost budget
D Cash budget (2 marks)
16.3 If a company has no production resource limitations, in which order would the following budgets be prepared? (i) Material usage budget (iv) Finished goods inventory budget
(ii) Sales budget (v) Production budget (iii) Material purchase budget (vi) Material inventory budget A (v), (iv), (i), (vi), (iii), (ii)
B (ii), (iv), (v), (i), (vi), (iii), C (ii), (iv), (v), (i), (iii), (vi)
D (ii), (v), (iv), (i), (vi), (iii) (2 marks)
16.4 In a situation where there are no production resource limitations, which of the following items of information must be available for the production budget to be completed?
(i) Sales volume from the sales budget
(ii) Material purchases from the purchases budget (iii) Budgeted change in finished goods inventory (iv) Standard direct labour cost per unit
A (i), (ii) and (iii) B (i), (iii) and (iv) C (i) and (iii)
D All of them (2 marks)
16.5 When preparing a production budget, what does the quantity to be produced equal?
A Sales quantity + opening inventory of finished goods + closing inventory of finished goods B Sales quantity – opening inventory of finished goods + closing inventory of finished goods C Sales quantity – opening inventory of finished goods – closing inventory of finished goods D Sales quantity + opening inventory of finished goods – closing inventory of finished goods
(2 marks)
16.6 The quantity of material in the material purchases budget is greater than the inferred from quantity of material in the material usage budget. Which of the following statements can be this situation? A Wastage of material occurs in the production process
B Finished goods inventories are budgeted to increase C Raw materials inventories are budgeted to increase
16.7 A company plans to sell 24,000 units of product R next year. Opening inventory of R is expected to be 2,000 units and PQ Co plans to increase inventory by 25 per cent by the end of the year. How many units of product R should be produced next year?
A 23,500 units
B 24,000 units C 24,500 units
D 30,000 units (2 marks)
16.8 Each unit of product Alpha requires 3 kg of raw material. Next month's production budget for product Alpha is as follows.
Opening inventories:
Raw materials 15,000 kg Finished units of Alpha 2,000 units Budgeted sales of Alpha 60,000 units Planned closing inventories:
Raw materials 7,000 kg Finished units of Alpha 3,000 units
How many kilograms of raw materials should be purchased next month? A 172,000
B 175,000 C 183,000
D 191,000 (2 marks)
16.9 Budgeted sales of X for December are 18,000 units. At the end of the production process for X, 10% of production units are scrapped as defective. Opening inventories of X for December are budgeted to be 15,000 units and closing inventories will be 11,400 units. All inventories of finished goods must have successfully passed the quality control check. What is the production budget for X for December? A 12,960 units
B 14,400 units C 15,840 units
D 16,000 units (2 marks)
16.10 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?
A $6,720 B $8,400 C $10,080
D $10,500 (2 marks)
16.11 Each unit of product Echo takes five direct labour hours to make. Quality standards are high, and 8% of units are rejected after completion as sub-standard. Next month's budgets are as follows.
Opening inventories of finished goods 3,000 units Planned closing inventories of finished goods 7,600 units
Budgeted sales of Echo 36,800 units
All inventories of finished goods must have successfully passed the quality control check. What is the direct labour hours budget for the month?
A 190,440 hours B 207,000 hours C 223,560 hours
16.12 Budgeted production in a factory for next period is 4,800 units. Each unit requires five labour hours to make. Labour is paid $10 per hour. Idle time represents 20% of the total labour time.
What is the budgeted total labour cost for the next period? A $192,000
B $240,000 C $288,000
D $300,000 (2 marks)
16.13 Which of the following statements are true?
(i) A flexed budget allows businesses to evaluate a manager's performance more fairly (ii) A fixed budget is useful for defining the broad objectives of the organisation (iii) Relying on fixed budgets alone would usually give rise to massive variances A (i) and (iii) only
B (i) and (ii) only C (ii) and (iii) only
D (i), (ii) and (iii) (2 marks)
16.14 A Local Authority is preparing a cash budget for its refuse disposal department. Which of the following items would NOT be included in the cash budget? A Capital cost of a new collection vehicle
B Depreciation of the refuse incinerator C Operatives' wages
D Fuel for the collection vehicles (2 marks)
16.15 The following details have been extracted from the receivables collection records of C Co. Invoices paid in the month after sale 60%
Invoices paid in the second month after sale 25% Invoices paid in the third month after sale 12%
Bad debts 3%
Invoices are issued on the last day of each month.
Customers paying in the month after sale are entitled to deduct a 2% settlement discount. Credit sales values for June to September are budgeted as follows.
June July August September
$35,000 $40,000 $60,000 $45,000 What is the amount budgeted to be received from credit sales in September?
A $46,260 B $49,480 C $50,200
D $50,530 (2 marks)
16.16 BDL plc is currently preparing its cash budget for the year to 31 March 20X8. An extract from its sales budget for the same year shows the following sales values.
$ March 60,000 April 70,000 May 55,000 June 65,000
40% of its sales are expected to be for cash. Of its credit sales, 70% are expected to pay in the month after sale and take a 2% discount; 27% are expected to pay in the second month after the sale, and the remaining 3% are expected to be bad debts.
What is the value of sales receipts to be shown in the cash budget for May 20X7? A $60,532
B $61,120 C $66,532
D $86,620 (2 marks)