Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Budgeting and Budgetary Control: Chapter 15, 16, 17, 18 and 19

Q1 CPA II 46 Batch 2 August 2024
Brothers John and Beau Plaid have recently won a design award for their ‘Ultra’ walking boots and
have established a company, JB Plaid Ltd, to start production of the footwear. The ‘Ultra’ boots
have an innovative design and are made of a resilient, cushioning material, which reduces the
possibility of injury. John has just read a newspaper article about the importance of cash budgets
in highlighting the finances required for business operations. Consequently, he has asked for your
assistance in preparing a cash budget for the first four months of operations, from May to August
20X5. The following information has been obtained from a planning meeting with the Plaid
brothers.
1. ‘Ultra’ boots are produced for men and women. Details of selling prices and projected sales
for the four-month period are shown below.
Type of boots Selling Pairs of boots
Price May June July August
Women’s $140 1,400 1,800 2,400 3,000
Men’s $160 2,000 2,400 3,000 3,200

2. It is expected that all sales will be on credit to department stores and shops specializing in
outdoor wear. The brothers estimated that 40% of customers will pay within one month
while the remaining customers will take two months to pay.
3. Production of the ‘Ultra’ boots is based on sales demand. The company requires a closing
inventory of 200 pairs of women’s boots and 400 pairs of men’s boots at the end of each
month. As the company is just commencing operations there are no opening inventories of
boots.
4. The boots comprise cushioning fabric and specially treated rubber for the sole. The
materials and labor required to make each pair of boots are shown in the following table.
Type of boots Cushioning fabric@$56 Rubber @$16 per Labor @
per meter meter $28 per hour
Women’s 0.3 m 0.10 m 0.20 hours
Men’s 0.4 m 0.15 m 0.25 hours

5. Both of the materials are supplied by one company based in Malaysia. This supplier requires
that 50% of the purchase total is paid for in cash with the order, and allows one month’s
credit for the remaining amount. Labor costs are paid in the month incurred.
6. Each pair of boots produced will be packed in a biodegradable cardboard box using
environmentally friendly packaging costing, in total, $3.70 per box. The company will buy
the packaging materials from a French company based in Cork and it has agreed one
month’s credit for these purchases.

1
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

7. The company has signed a rental agreement for the production facility. The total factory
rent for the year will be $720,000, which will be paid in equal monthly instalments. A
security deposit amounting to $50,000 must also be paid in May. Other operational costs
including power, insurance, and administration expenses, which must be paid monthly, are
expected to be $187,200 for the year.
8. To promote the walking boots a marketing campaign for television, radio, newspaper and
social media has been organized. The total cost of the marketing campaign has been agreed
at $30,000 for the four-month period payable in equal instalments from May 20X5. A
commission of 5% of projected sales is also payable one month in arrears.
9. John and Beau Plaid will introduce capital of $100,000 at the commencement of the
company’s operations.

Required:
(a) Prepare a cash budget for JB Plaid Ltd on a monthly basis, for the four-month period
commencing 1 May 20X5. (22 marks)
(b) Explain the meaning of the following terms
(i) Master budget
(ii) Flexible budget (3 marks)
(Total 25 marks)
Q2. CPA II 45 Batch Q24
Mr. John is the Managing Director of Twelve Media Company Limited, a production company responsible
for the huge success of the television programme ‘Pop Star 1’ and ‘Pop Star 2’. The program is just nearing
the end of the second series, with only four weeks to go before the public chooses a winner.

Mr. John is in the process of deciding whether to run a ‘Pop Star tour’. This would consist of twelve live
performances, in twelve different locations, during the month of September. The twelve finalists from the
television programme would all take part in the tour. Twelve Media Company Limited ran a ‘Pop Star 1’ tour
after the first series and this was a big success. Mr. John is concerned, however, about the effect of the tour
on the company’s cash flow, as the company currently has funds tie up in several other projects.

You have been provided with the following information.

(i)Twelve Media Company Limited will open a separate bank account on 1 July 2024 for the tour, with an
opening balance of $600,000.

(ii)During the “Pop Star 1” tour, it was calculated that for each thousand votes cast during the final twelve
television programmes, one person attend the Pop Star tour. This ration is expected to remain the same
for the second Pop Star tour, should it go ahead. During the last eight weeks of Pop Star 2, the public has
cast a total of 200 million votes. This is an average of 25 million votes per week. Public interest is
expected to increase over the final four weeks and it is therefore estimated that votes for the remaining
four weeks will be 100 million in total.

2
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

(i) Tickets vary in price according to the seat allocation within each venue. Ticket information is as follows:
Ticket type Price Percentage of total tickets sold
Premium seats $70 20%
Arena floor $60 30%
Stalls $50 50%
It is expected that 30% of ticket revenues will be received in September, 20% in October, 30% in
November and the remainder in December.
(ii) At every live performance, a selection of souvenirs will be on sale, from mugs and t-shirts to CDs and
DVDs. From the Pop Star 1 tour it has been calculated that for every ticket sold, an average of $8 is spent
on souvenirs. Those monies are received by Twelve Media in September.
(iii) The souvenirs are purchased from two key suppliers – WTD Ltd, who produce all the CDs and DVDs (60%
of total souvenirs sales), and Winner Ltd who produce everything else (remaining 40% of sales). The
gross profit margins for Twelve Media are 20% of CDs and DVDs and 40% for everything else. All orders
must be made from both suppliers in August but whereas WTD Ltd requires payment at the time of
order, Winner Ltd provides one month’s credit.
(iv) Each of the twelve performers will be paid $25,000 for his/her participation in the live tour. Of this
amount, $5,000 will be paid at the start of the tour at the beginning of September, with the remainder
being paid at the beginning of October.
(v) Twelve Media will pay an average of $150,000 to hire each of the twelve venues for the live tour. In
order to secure the venues, a deposit of 20% had to be paid in June for each venue out of one of the
company’s existing bank accounts. The remaining balances will be paid in August from the tour bank
account.
(vi) Twelve Media will need to hire two tour buses in August – one for the performers and one for the crew.
The cost of these will be $20,000 each. In addition to these, six heavey vehicles will be required to
transport equipment. Each vehicle costs $12,000. All of these transport costs include driver costs and
fuel. 25% of the total transport costs (including buses) will be paid in August, with the remainder being
paid in October.
(vii) For each performer on the tour, five members of crew are required over and above the already existing
staff of Twelve Media. The average gross wage of each crewmember is $10,000 per month. Whilst all
of these crewmembers are required for the month of September, only half of them are needed for
August. All crewmembers are paid at the end of each month that they work.
(viii) The crewmembers are hired through an agency, Hands on Apple Ltd. The agency charges a fee for
each member of crew hired through them. The fee is calculated as 20% of the gross monthly wage of
each crew member and is paid for EVERY month that they work. Hands on Apple Ltd allows one month’s
credit.
(ix) Publicity for the tour is expected to cost a further $2.5 million. Of this amount, 30% will be paid in July
and 20% paid in August. Mr. John has negotiated delaying the remaining payment until November.
(x) Other costs are estimated to be in the region of $300,000 IN TOTAL, incurred evenly through the months
of July, August, September and October. They will be paid in the month in which they are incurred.
3
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

(xi) All workings should be in $’000, to the nearest $’000.

Required:

(a) Prepare a monthly cash budget for the for the Pop Star 2 Tour for EACH of the six months to 31 December
2024, showing clearly any necessary workings. (30 marks)

Q3. Intensive Revision

Sally Sharp is the Managing Director of Seventeen Ltd, a production company responsible for the huge
success of the television programme ‘Pop Icon 1’ and ‘Pop Icon 2’. The program is just nearing the end of
the second series, with only four weeks to go before the public chooses a winner.

Sally is in the process of deciding whether to run a ‘Pop Icon tour’. This would consist of twelve live
performances, in twelve different locations, during the month of September. The twelve finalists from the
television programme would all take part in the tour. Seventeen Ltd ran a ‘Pop Icon 1’ tour after the first
series and this was a big success. Sally is concerned, however, about the effect of the tour on the company’s
cash flow, as the company currently has funds tie up in several other projects.

You have been provided with the following information.

(i) Seventeen Ltd will open a separate bank account on 1 July 2005 for the tour, with an opening balance
of $500,000.
(ii) During the Pop Icon 1 tour, it was calculated that for each thousand votes cast during the final twelve
television programmes, one person attend the Pop Icon tour. This ratio is expected to remain the same
for the second Pop Icon tour, should it go ahead. During the last eight weeks of Pop Icon 2, the public
has cast a total of 180 million votes. This is an average of 22.5 million votes per week. Public interest is
expected to increase over the final four weeks and it is therefore estimated that votes for the remaining
four weeks will be 100 million in total.
(iii) Tickets vary in price according to the seat allocation within each venue. Ticket information is as follows:
Ticket type Price Percentage of total tickets sold
Premium seats $35 10%
Arena floor $30 30%
Stalls $25 60%
It is expected that 20% of ticket revenues will be received in September, 30% in October, 30% in
November and the remainder in December.
(iv) At every live performance, a selection of souvenirs will be on sale, from mugs and t-shirts to CDs and
DVDs. From the Pop Icon 1 tour it has been calculated that for every ticket sold, an average of $6 is
spent on souvenirs. Those monies are received by Seventeen Ltd in September.
(v) The souvenirs are purchased from two key suppliers – Records Ltd, who produce all the CDs and DVDs
(50% of total souvenirs sales), and Junk Ltd who produce everything else (remaining 50% of sales). The
gross profit margins for Seventeen Ltd are 25% for CDs and DVDs and 50% for everything else. All orders

4
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

must be made from both suppliers in August but whereas Records Ltd requires payment at the time of
order, Junk Ltd provides one month’s credit.
(vi) Each of the twelve performers will be paid $35,000 for his/her participation in the live tour. Of this
amount, $5,000 will be paid at the start of the tour at the beginning of September, with the remainder
being paid at the beginning of October.
(vii) Seventeen Ltd will pay an average of $150,000 to hire each of the twelve venues for the live tour. In
order to secure the venues, a deposit of 10% had to be paid in May for each venue out of one of the
company’s existing bank accounts. The remaining balances will be paid in August from the tour bank
account.
(viii) Seventeen Ltd will need to hire two tour buses in September – one for the performers and one for the
crew. The cost of these will be $10,000 each. In addition to these, six heavey vehicles will be required
to transport equipment. Each vehicle costs $12,000. All of these transport costs include driver costs
and fuel. 75% of the total transport costs (including buses) will be paid in September, with the
remainder being paid in October.
(ix) For each performer on the tour, five members of crew are required over and above the already existing
staff of Seventeen Ltd. The average gross wage of each crewmember is $12,000 per month. Whilst all
of these crewmembers are required for the month of September, only half of them are needed for
August. All crewmembers are paid at the end of each month that they work.
(x) The crewmembers are hired through an agency, Hands on Deck Ltd. The agency charges a fee for each
member of crew hired through them. The fee is calculated as 10% of the gross monthly wage of each
crewmember and is paid for EVERY month that they work. Hands on Deck Ltd allows one month’s credit.
(xi) Publicity for the tour is expected to cost a further $2.5 million. Of this amount, 20% will be paid in July
and 30% paid in August. Sally has negotiated delaying the remaining payment until November.
(xii) Other costs are estimated to be in the region of $240,000 IN TOTAL, incurred evenly through the months
of July, August, September and October. They will be paid in the month in which they are incurred.
(xiii) All workings should be in $’000, to the nearest $’000.

Required:

(b) Prepare a monthly cash budget for the for the Pop Icon 2 Tour for EACH of the six months to 31
December 2005, showing clearly any necessary workings. (30 marks)

The following information applies to part (b) only.

Sally is concerned that the above calculations rely on the public’s average weekly votes increasing in the final
four weeks of the programme. They also rely on the assumption that there will be one ticket sale per
thousand votes. Sally is concerned about the effect on profit should these assumptions be wrong, with the
second tour proving to be less popular that the first one. She now wants you to assume that voting for the
final four weeks of the programme stays at the same average level as the previous eight weeks AND that for
every TWO thousand votes only one person attends the tour.

Required:

5
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

(c) Calculate the original profit of the project as per part (a) AND the revised profit/loss after the change
the assumptions.
(10 marks)

Q4 CPA II 44 Batch

The brothers who have the capital of $160,000 decides to commence a business on 5 January 20X3,
manufacturing a product for which they know there is a ready market. Suitable premises have been found
to rent and second-hand machinery costing $120,000 has been bought out of the $160,000. This machinery
has an estimated life of five years from January 20X3 and no residual value.

Other data:

(1) Estimated sales are:

Units $
January Nil Nil
February 6,400 160,000
March 7,200 180,000
April 8,000 200,000
May 8,000 200,000
(2) Production will begin on 5 January and 25% of the following month’s sales will be manufactured in
January. Each month thereafter the production will consist of 75% of the current month’s sales and 25%
of the following month’s sales.
(3) Direct materials cost is $7 per unit, direct labour cost is $6 per unit and variable overhead is $2 per unit.
(4) Raw material costing $20,000 have been purchased (out of $160,000) to enable production to
commence and it is intended to buy, each month, 50% of the materials required for the following
month’s production requirements. The other 50% will be purchased in the month of production.
Payment will be made 30 days after purchase.
(5) Direct workers have agreed to have their wages paid into bank accounts on the seventh working day of
each month in respect of the previous month’s earnings.
(6) Variable production overhead: 60% is to be paid in the month following the month it was incurred and
40% is to be paid one month later.
(7) Fixed overheads are $8,000 per month. One quarter of this is paid in the month incurred, one half in
the following month, and the remainder represents depreciation on the second-hand machinery.
(8) Amounts receivable: a 5% cash discount is allowed on payment in the current month and 20% of each
month’s sales qualify for this discount, 50% of each month’s sales are received in the following month,
20% in the third month and 8% in the fourth month. The balance of 2% represents anticipated bad
debts.

Required:

Prepare a cash budget for each of the first four month of 20X3. (20 marks)

6
 Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Q5. CPA II 43 Batch

Planet Company produces two products, Sonic and Beauty. The budget for the forthcoming year to 31 March
20X8 is to be prepared. Expectations for the forthcoming year include the following.
(a) Balance sheet of Planet Company as at 1st April 20X7
Fixed assets $ $
Land and buildings 90,000
Plant and equipment at cost 374,000
Less accumulated depreciation 150,000
224,000
Current assets
Raw materials 15,300
Finished goods 47,200
Debtors 39,000
Cash 8,600
110,100
Current liabilities
Creditors 13,600
Net Current Assets 96,500
Net Asset (Equity) 410,500
Financed by
Share capital 300,000
Retained profit 110,500
410,500
(a) Finished products
The sales directors has estimated the following;
Sonic Beauty

(i) Demand for the company’s products 5,000 units 4,500 units

(ii) Selling price per unit $32 $44

(iii)Closing stock of finished products at 31 March 20X8 800 units 600 units

(i) Opening stock of finished products 1 April 20X7 1,800 units 100 units
(ii) Unit cost of this opening stock $20 $28
(iii) Amount of plant capacity required for each unit of product
Machining 15 min 24 min
Assembling 12 min 18 min
(iv) Raw material content per unit of each product
Material A 1.5 kg 0.5 kg
Material B 2.0 kg 4.0 kg

(v) Direct labour hours required per unit of each product 6 hours 9 hours

Finished goods are valued on a FIFO basis at full production cost.

(c ) Raw materials
Material A Material B
(i) Closing stock requirement in kilos at 31.3.20X8 600 1,000
(ii) Opening stock at 1 April 20X7 in kilos 1,100 6,000

7
 Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

(iii) Budgeted cost of raw materials per kilo $1.5 $1.00

Actual costs per kilo of opening stocks are as budgeted cost for the coming year.

(d) Direct labour

The standard wage rate of direct labour is $1.60 per hour.

(e) Production overhead

Production overhead is absorbed on the basis of machining hours, with separate absorption rates for each
department. Overheads in the machining department are anticipated to be $ 39,500, while in the
assembling department they are anticipated to be $18,650.

Depreciation is taken at 5% straight line on plant and equipment. A machine costing the company $20,000
is due to be installed on 1 October 20X7 in the machining department, which already has machinery
installed to the value of $100,000 (at cost). Land worth $180,000 is to be acquired in December 20X7.

(f) Selling and administration expenses are expected to be $40,000.

(g) There is no opening and closing work in progress and inflation should be ignored.

(h) Budgeted cash flows are as follows.

Quarter 1 Quarter 2 Quarter 3 Quarter 4

Receipts from customers 70,000 100,000 100,000 40,000

Payments:

Materials 7,000 9,000 10,000 5,000

Wages 33,000 20,000 11,000 15,000

Other costs and expenses 10,000 100,000 205,000 5,000

Required:

Prepare the following for the year ended 31 March 20X8 for Planet Company.

(a) Sales budget (2 marks)

(b) Plant utilization budget (3 marks)
(c) Direct material usage budget (3 marks)
(d) Production overhead budget (2 marks)
(e) Master budget (20 marks)

Q6. CPA II 42 Batch

The following information respects of GG trading Co Ltd. You are an assistant finance manager and you have
to prepare a cash forecasting model for the company to review your finance manager of working capital.

Profit and loss account for the year ended 31 March, 2017

$ $
Revenue 3,654,199
Less: Cost of goods sold 2,111,384
Gross profit 1,542,815
Wages and salaries 655,821
Administration expenses 348,900
8
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Depreciation expenses 198,400 1,203,212

Operating profit 339,694
Interest 66,292
Taxation 101,960 168,252
Net profit after tax 171,442

Balance sheet as at 31 March, 2017

$ $ $
Non current assets
Buildings – Net 300,000
Motors – Net 132,385
432,385
Current assets
Stock 895,300
Accounts receivables 181,342
1,076,642
Less: current liabilities
Account payable 277,842
Tax payable 101,960
Other payables 25,000
Bank overdraft 402,120 806,922
269,720
702,105
Share capital and reserve fund
Common stock 150,000
Retained earnings 327,105 477,105

Long term liabilities

Loan 255,000
702,105
There are other additional information is available for the balance sheet items:

(a) Account receivable and Account payable

Accounts receivable consists of:
Trade receivable $146,392
Other receivables $ 34,950
$181,342

The other receivables will be received in May 2017.

(b) Account payable includes:
February unpaid purchased $101,421
March unpaid purchased $101,421
Disputed supplies balance $ 75,000
$277,842
(c) The tax will be paid in June 2017
(d) It is assumed that the revenue and expenses are spread evenly through the year.
(e) The company received bank loan of $250,000 on 31 May 2016. It is repayable in equal annual
installments over ten years with the first installment being due on 31 May 2017 and the loan
9
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

interest will be payable annually on the same date of paying installment. The interest rate is
10% per annum.
(f) On 1st April 2017, the company is implementing 8% price uplift on all its sales. It offers a 30 days
period of credit to all of it customers and all customers do pay within the period.
(g) The company need to replace of its Motor car. It has agreed to spend $300,000 on new motor
in June and it is payable immediately when delivery date. It anticipates that it will be able to
sell the old motor for $10,000 in November 2017.
(h) The company has agreed a new commercial arrangement with its main suppliers with the effect
that, from 1 April 2017, 85% of all purchases will be cheaper as the result of the introduction of
a 5% discount. However, the discount can only be achieved if their suppliers received payment
in the month following the month of delivery. It is expected that the remaining 15% of all
purchases will suffer a 3% increase in cost from 1 April 2017. The company has paid all of its
suppliers on a 60 days basis-in the second month following the month of delivery.
(i) Payroll costs are expected to rise by 6% from 1 April 2017. All other expenses are expected to
rise by 4% from the same date.
(j) There has been a long-standing disputes with one supplier. An amount of $75,000 has been
overdue for payment since March 2016. An agreement has been reached with this supplier to
pay this amount in three installments from April. A $30,000 in April, $40,000 will be paid in May
and the remaining balance is received in June.
(k) After the completion of the accounts to 31 March 2017 but before the preparation of the cash
budget, the director learn that a customer has gone into bankrupt leaving unpaid trade
receivables of $4,400.
(l) The overdraft facility from TZ bank is maximum $650,000.

Required:
(a) Prepare a monthly cash budget for the three months 30 April to 30 June 2017 and identify if
there will be any breaches of the company’s overdraft limit.
Review the cash budget and identify any suggestions for improving the profile of overdraft
utilization over this period.

10
 Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Q7. CPA II Text CPA I 41 Batch , CPA II 43 Batch

Plagued Engineering Limited produces two products, Niks and Args. The budget for the forthcoming year
to 31 March 20X8 is to be prepared. Expectations for the forthcoming year include the following.
(b) PLAUGED ENGINEERING LIMITED
BALANCE SHEET AS AT 1 APRIL, 20X7
Fixed assets $ $
Land and buildings 45,000
Plant and equipment at cost 187,000
Less accumulated depreciation 75,000
112,000
Current assets
Raw materials 7,650
Finished goods 23,600
Debtors 19,500
Cash 4,300
55,050
Current liabilities
Creditors 6,800
Net Current Assets 48,250
Net Asset (Equity) 205,250
Financed by
Share capital 150,000
Retained profit 55,250
205,250
(c) Finished products
The sales directors has estimated the following;
Niks Args
(i) Demand for the company’s products 4,500 units 4,000 units
(ii) Selling price per unit $32 $44
(iii) Closing stock of finished products at 31 March 20X8 400 units 1,200 units
(iv) Opening stock of finished products 1 April 20X7 900 units 200 units
(v) Unit cost of this opening stock $20 $28
(vi) Amount of plant capacity required for each unit of product
Machining 15 min 24 m in
Assembling 12 min 18 min
(vii) Raw material content per unit of each product
Material A 1.5 kg 0.5 kg
Material B 2.0 kg 4.0 kg
Niks Args
(viii) Direct labour hours required per unit of each product 6 hours 9 hours
Finished goods are valued on a FIFO basis at full production cost.
(c ) Raw materials
Material A Material B
(iv) Closing stock requirement in kilos at 31.3.20X8 600 1,000
(v) Opening stock at 1 April 20X7 in kilos 1,100 6,000
(vi) Budgeted cost of raw materials per kilo $1.5 $1.00

Actual cost per kilo of opening stocks are as budgeted cost for the coming year.

11
 Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

(di) Direct labour

The standard wage rate of direct labour is $1.60 per hour.

(e) Production overhead

Production overhead is absorbed on the basis of machining hours, with separate absorption rates for each
department. Overheads in the machining department are anticipated to be $ 39,500, while in the
assembling department they are anticipated to be $18,650.

Depreciation is taken at 5% straight line on plant and equipment. A machine costing the company $20,000
is due to be installed on 1 October 20X7 in the machining department, which already has machinery
installed to the value of $100,000 (at cost). Land worth $180,000 is to be acquired in December 20X7.

(f) Selling and administration expenses are expected to be $30,400.

(g) There is no opening and closing work in progress and inflation should be ignored.

(h) Budgeted cash flows are as follows.

Quarter 1 Quarter 2 Quarter 3 Quarter 4

Receipts from customers 70,000 100,000 100,000 40,000

Payments:

Materials 7,000 9,000 10,000 5,000

Wages 33,000 20,000 11,000 15,000

Other costs and expenses 10,000 100,000 205,000 5,000

Required:

Prepare the following for the year ended 31 March 20X8 for Plagued Engineering Ltd.

(a) Sales budget

(b) Production budget (in quantities)
(c) Plant utilization budget
(d) Direct material usage budget
(e) Direct labour budget
(f) Production overhead budget
(g) Computation of the factory cost per unit for each product
(h) Direct materials purchase budget
(i) Cost of goods sold budget
(j) Master budget (Cash Budget, PL Budget, Balance Sheet)

12
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Q8.

From the following information which relates to George and Zola Ltd you are required to prepare a month-
by-month cash budget for the second half of 20X5 and to append such brief comments as you consider might
be helpful to management.

(a) The company’s only product, a vest, sells at $40 and has variable cost of $26 made up of materials $20,
labour $4 and overhead $2.
(b) Fixed costs of $ 6,000 per month are paid on the 28th of each month.
(c) Quantities sold / to be sold on credit
May June July Aug Sept Oct Nov Dec
1,000 1,200 1,400 1,600 1,800 2,000 2,220 2,600
(d) Production and quantities
May June July Aug Sept Oct Nov Dec
1,200 1,400 1,600 2,000 2,400 2,600 2,400 2,200
(e) Cash sales at a discount of 5% are expected to average 100 units a month.
(f) Customers settle their accounts by the end of the second month following sales.
(g) Suppliers of material are paid two months after the material is used in production.
(h) Wages are paid in the same month as they are incurred.
(i) 70% of the variable overheads is paid in the month of production, the reminder in the following month.
(j) Corporation tax of $18,000 is to be paid in October.
(k) A new delivery vehicle was bought in June. It costs $8,000 and is to be paid for in August. The old
vehicle was sold for $600, the buyer undertaking to pay in July
(l) The company is expected to be $3,000 overdraw at the bank at 30 June 20X5.
(m) No increases or decreases in raw materials, work in progress or finished goods are planned over the
period.
(n) No price increases or cost increases are expected in the period.

Q9. Flexible Budget

TJ Ltd is an industry sector, which is recovering from the recent recession. The directors of the company
hope next year to be operating at 85% of capacity, although currently the company is operating at only 65%
of the capacity. 65% of capacity represents output of 10,000 units of the single product which is produced
and sold. One hundred direct workers are employed on production for 200,000 hours in the current year.
The flexible budget for the current year are:
Capacity level 55% 65% 75%
$ $ $
Direct materials 846,200 1,000,000 1,153,800
Direct wages 1,480,850 1,750,000 2,019,150
Production overhead 596,170 650,000 703,830
Selling and distribution overhead 192,310 200,000 207,690
Administration overhead 120,000 120,000 120,000
Total costs 3,235,530 3,720,000 4,204,470

Profit in any year is budgeted to be 16 2/3 % of sales.

The following percentages increased in costs are expected for next year:
Increase
%
Direct materials 6

13
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Direct wages 3
Variable production overhead 7
Variable selling and distribution overhead 7
Fixed production overhead 10
Fixed selling and distribution overhead 7.5
Administration overhead 10

You are required to:

Prepare for next year a flexible budget statement on the assumption that the company operates at 85% of
capacity; your statement should show both contribution and profit.

Q10.

D Ltd is preparing its annual budget for the year to 31 December 20X4. It manufactures and sells one
product, which has a selling price of $150. The marketing director believes that the price can be increased
to $160 with effect from 1 July 20X4 and that at this price the sales volume for each quarter of 20X4 will be
as follows:

Sales Volume

Quarter 1 40,000

Quarter 2 50,000

Quarter 3 30,000

Quarter 4 45,000

Sales for each quarter of 20X5 are expected to be 40,000 units.

Each unit of the finished product which is manufactured required four units of component R and three units
of component T, together with a body shell S. These items are purchased from an outside supplier.
Currently prices are:

Component R $8.00 each

Component T $ 5.00 each

Shell S $ 30.00 each

The components are expected to increase in price by 10% with effect from 1 April 20X4; no change is
expected in the price of the shell.

Assembly of the shell and components into the finished product requires 6 labour hours: labour is currently
paid $5.00 per hour. A 4% increase in wage costs is anticipated to take effect from 1 October 20X4.

Variable overhead costs are expected to be $10 per unit for the whole of 20X4; fixed production overheads
costs are expected to be $240,000 for the year, and are absorbed on a per unit of basis.

Stock on 31 December 20X3 are expected to be as follows:

Finished units 9,000 units

Component R 3,000 units

14
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Component T 5,500 units

Shell S 500 units

Closing stocks at the end of each quarter are to be as follows:

Finished unit 10% of next quarter’s sales

Component R 20% of next quarter’s production requirements

Component T 15% of next quarter’s production requirements

Shell S 10% of next quarter’s production requirements

You are required to

(a) Prepare the following budgets of D Ltd for the year ending 31 December 20X4, showing values for each
quarter and the year in total:
(i) Sales budget (in $ and units)
(ii) Production budget (in units)
(iii) Material usage budget (in units)
(iv) Production cost budget (in $)
(b) Sales are often considered to be the principal budget factor of an organization.
You are required to
Explain the meaning of the “principal budget factor” and, assuming that it is sales, explain how sales
may be forecast making appropriate reference to the use of statistical techniques and the use of
microcomputers.

Q11. CPA I

A phone accessories-company commenced trading twelve months ago and as a result of a very successful
year is seeking bank finance to expand. The company imports a specialized mobile phone case from an
overseas supplier and currently sells it in a limited range of stores in Yangon. The case is unique in that it
comprises a high quality, durable resin and can be adjusted to fit either of the two leading smartphones in
the market. Additional bank funding would allow the company to extend its retailer network in the other
cities with the possibility of establishing outlets in Mandalay. However, to consider and application for
finance, the bank requires Company to prepare a cash budget, forecasting its receipts and payments for the
next six months commencing on 1 June 2017. The company has provided the following information.

1. Each case will cost $ 6.2 to purchase from the overseas supplier and the company has agreed to pay
50% of all purchases in cash with the remainder paid in the month after purchase.
2. The company will sell the case to retail customers for $ 11.25 and projects the following sales ( in units
) for the next six months:
June July August September October November December
10,000 12,000 15,000 15,000 16,000 18,000 18,000
3. To encourage prompt payments from customers, effective from 1 June 2017, the company has decided
to give a discount for cash payment. The company expects that 20% of all customers will accept the
offer and will receive a discount of 5%. Of the remaining monies receivable, the company expects to
receive 50% one month after the month of sale, 45% two month after the month of sale and the
remainder will be bad debts.
4. To ensure that sales opportunities are not missed, the company will hold inventory at the end of each
month amounting to 10% of the following month’s projected sales. At 1 June 2017, the company
expects to have 1,000 cases in inventory.

15
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

5. Salary and wage costs per month are expected to be $ 19,000 for the first two months and to increase
by $ 2,000 per month for each of the next four months, as the company hires new staff.
6. Administration costs are projected to be $ 82,000 for the year, including depreciation
7. The company has decided to purchase additional computer equipment to support its sales staff.
Laptops and printers costing $ 16,200 will be purchased and paid for in November.
8. At 1 June 2017, the Company projects that it will have the following balance:
Bank overdraft $ 2,960
Amounts receivable ( all amount to be received in June 2017 ) $ 30,980
Amounts payable ( due in June 2017 ) $ 25,100

Requirement:

Prepare a cash budget for the Company on a monthly basis, for the six month period commencing 1 June
2017, clearly showing the closing cash balance at the end of each month.

Q 12. CPA I

A wholesale company ends its financial year on 30 June. You have been requested, in early July 20X5, to
assist in the preparation of cash forecast. The following information is available regarding the company’s
operation.

(a) Management believes that the 20X4 / 20X5 sale level and pattern are a reasonable estimate of 20X5 /
20X6. Sales in 20X4 / 20X5 were as follow:

$ $

20X4 July 460,000 20X5 January 450,000

August 520,000 February 650,000

September 700,000 March 600,000

October 640,000 April 500,000

November 580,000 May 700,000

December 500,000 June 900,000

Total ( July 20X4 – 20X5) 7,200,000

(b) The accounts receivable at 30 June 20X5 total $ 435,000. Sales collections are generally made as follows:

During the month of sales 60 %

In first subsequent month 30 %

In second subsequent month 9%

Uncollectable 1%

(c) The purchase costs of goods averages 75 % of selling price. The cost of stock on hand at 30 June 20X5 is
$ 1,260,000, of which $ 60,000 is obsolete. Arrangements have been made to sell the obsolete stock in July
at half the normal selling price on cash on delivery basis. The company wishes to maintain the stock, as of
the first of each month, at a level of three month’s sales as determined by the sales forecast for the next
three months. All purchases are paid on the tenth of the following month. Accounts payable for purchases
at 30 June 20X5 is $ 470,000.

16
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

(d) Payments in respect of fixed and variable overhead expenses forecast for the first three months of 20X5
/ 20X6 as follows. 60 % of overheads expenses are paid in the month they are incurred and the remainder
are paid in the following month. The account payable for these overheads as of 30 June 20X5 is $ 75,000.

July $ 140,000

August $ 120,000

September $ 150,000

(e) It is anticipated that cash dividends $ 50,000 will be paid each half year, on the fifteenth day of September
and March.

(f) During the year unusual advertising costs will be incurred by $ 10,000 in August and $ 15,000 in September
with 75% cash down payments and one month credit for remaining balance. The advertising costs are in
addition to the expenses in item (d) above.

(g) Equipment replacements are made at a rate which requires a cash outlay of $ 5,000 per month. The
equipment has an average estimated life of six years.

(h) A $ 60,000 payment for corporation tax is to be made on 15 September 20X5.

(I) At 30 June 20X5 the company had a bank loan with an unpaid balance of $ 300,000. The entire balance
is due on 30 September 20X5 together with accumulated interest due from July 20X5 at the rate of 14 % pa.

(j) The cash balance at July 20X5 is $ 150,000.

You are required to prepare a cash forecast / budget statement by month for first quarter of 20X5 / 20X6
financial year. The statement should show the amount of cash on hand and deficiency of cash at the end of
each month. (Total 25 marks)

Q13. CPA Text Page 337

(a) Prepare a budget for 20X6 for the direct labour costs and overhead expenses of a production department
flexed at the activity levels of 80 %, 90 % and 100 %, using the information listed below and ignoring inflation.

(1) The direct labour hourly rate is expected to be $ 3.75.

(2) 100 % activity represents 60,000 direct labour hours.

(3) Variable indirect labour cost $ 0.75 per direct labour hour

Variable consumable supplies cost $ 0.375 per direct labour hour

Canteen and other welfare services 6 % of direct and indirect labour costs

(4) Semi-variable costs are expected to relate to the direct labour hours in the same manner as for the last
five years.

Year Direct labour hours Semi-variable costs ( $ )

20X1 64,000 20,800

20X2 59,000 19,800

20X3 53,000 18,600

20X4 49,000 17,800

17
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

20X5 40,000 (estimate) 16,000 (estimate)

(5) Fixed costs $

Depreciation 18,000

Maintenance 10,000

Insurance 4,000

Rates 15,000

Management salaries 25,000

(b) Calculate the budget cost allowance ( ie expected expenditure ) or flexed budget for 20X6 assuming that
57,000 direct labour hours are worked. (Total 20 marks)

Q 14.

Newton Ltd manufactures two products. The expected sales for each product are shown below.

Product 1 Product 2

Sales in units 3,000 4,500

Opening inventory is expected to be:

Product 1 500 units

Product 2 700 units

Management have stated their desire to reduce inventory levels, and closing inventory is budgeted as:

Product 1 200 units

Product 2 300 units

Two types of material are used in varying amounts in the manufacture of the two products. Material req
uirements are shown below:

Product 1 Product 2

Material M1 2 kg 3 kg

Material M2 3 kg 3 kg

The opening inventory of material is expected to be:

Material M1 4,300 kg

Material M2 3,700 kg

Management are keen to reduce inventory levels for materials, and closing inventory levels are to be muc
h lower. Expected levels are shown below:

Material M1 2,200 kg

Material M2 1,300 kg

18
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Material prices are expected to be 10% higher than this year and current prices are $1.10/kg for material M
1 and $3.00/kg for material M2.

Two types of labour are used in producing the two products. Standard times per unit and expected wage rat
es for the forthcoming year are shown below:

Product 1 Product 2

Hours per unit

Skilled labour 3 1

Semi-skilled labour 4 4

Skilled labour is to be paid at the rate of $9/hour and semi-skilled labour at the rate of $6/hour.

Production overheads per labour hour are as follows:

Variable $3.50 per labour hour

Fixed $5.50 per labour hour

Calculate the following:

(a) The number of units of product 1 to be produced

(b) The number of units of product 2 to be produced

(c) The quantity of material M1 to be used

(d) The quantity of material M2 to be used

(e) The quantity of material M1 to be purchased and the value of the purchases

(f) The quantity of material M2 to be purchased and the value of the purchases

(g) The number of hours of skilled labour and the cost of this labour

(h) The number of hours of semi-skilled labour and the cost of this labour

(i) The total overhead budget

Q15.

The following budgeted income statement has been prepared for Quest Company for the four months Ja
nuary to April Year 5:
January February March April
$000 $000 $000 $000
Sales 60.0 50.0 70.0 60.0
Cost of production 50.0 55.0 32.5 50.0
(increase)/decrease in inventory (5.0) (17.5) 20.0 (5.0)
Cost of sales 45.0 37.5 52.5 45.0
Gross profit 15.0 12.5 17.5 15.0
Administration and Selling OH (8.0) (7.5) (8.5) (8.0)
Net profit before interest 7.0 5.0 9.0 7.0

19
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

• 40% of the production cost relates to direct materials. Materials are bought in the month prior to the m
onth in which they are used. Purchases are paid for one month after purchase.

• 30% of the production cost relates to direct labour which is paid for when it is used.

• The remainder of the production cost is production overhead.

• $5,000 per month is a fixed cost which includes $3,000 depreciation. Fixed production overhead costs a
re paid for when incurred.

• The remaining overhead is variable. The variable production overhead is paid 40% in the month of usag
e and the balance one month later. Unpaid variable production overhead at the beginning of January
is $9,000.

• The administration and selling costs are paid quarterly in advance on 1 January, 1 April, 1 July and 1 Oct
ober. The amount payable is $15,000 per quarter.

• All sales are on credit. 20% of receivables are expected to be paid in the month of sale and 80% in the fo
llowing month. Unpaid trade receivables at the beginning of January were $44,000.

• The company intends to purchase capital equipment costing $30,000 in February which will be payabl
e in March.

• The bank balance on 1 January Year 5 is expected to be $5,000 overdrawn.

Required:
Complete the cash budget for each of the months January to March Year 5 for Quest Company.
-------------------------------------------------------------------------------------------------------------------------------------
Q16.
Hash makes one product the Brown. Sales for next year are budgeted at 5,000 units of Brown. Planned
selling price is $230.
Hash expects to have the following opening inventory and required closing inventory levels of finished
products:
Units
Opening inventory 100
Required closing inventory 1,100
Budgeted production data for the product is as follows:

Finished products
Raw material X: Kg per unit 12
Direct labour hours per unit 8
Raw material inventories
Opening inventory (kg) 5,000
Planned closing inventory (kg) 6,000
Standard rates and prices:
Direct labour rate per hour $7

20
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Material X purchase price per kg $2

Production overhead absorption rates
Variable $1 per direct labour hour
Fixed $8 per direct labour hour
Budgeted administration and marketing overheads are $225,000.
The opening Statement of financial position is expected to be as follows:
$ $
Non-current assets 950,000
Inventory 66,000
Trade receivables 260,000
Cash 25,000
–––––––
351,000
–––––––
Trade payables 86,000
Other short-term liabilities 24,000
–––––––
110,000
–––––––
Net current assets 241,000
–––––––
Net assets 1,191,000
–––––––
Non-current assets in the statement of financial position are expected to increase by $40,000, but no
change is expected in trade receivables, trade payables and other short-term liabilities.

There are no plans at this stage to raise extra capital by issuing new shares or obtaining new loans. Th
e company currently has an overdraft facility of $300,000 with its bank.
Required:
Complete the following:
(i) The production budget
(ii) The raw material usage budget
(iii) The raw material purchases budget
(iv) The direct labour budget
(v) The overhead budget
(vi) The cost per unit of Brown.
(vii) Budgeted income statement

21
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Q 17. Budget Page 43 Q 2.3

There is a continuing demand for three sub-assemblies- A, B and C – made and sold by MW Ltd. Sales are in
the ratios of A 1, B 2, C 4 and selling prices are A $215, B $250, C $300. Each subassembly consists of a
copper frame onto which are fixed the same components but in differing quantities as follows;
Sub-assembly Frame Component Component Component
D E F
A 1 5 1 4
B 1 1 7 5
C 1 3 5 1
Buying in costs, per unit $20 $8 $5 $3
Operation times by labour for each-assembly are:
Sub-assembly Skilled hours Unskilled hours
A 2 2
B 1½ 2
C 1½ 3
The skilled labour is paid $6 per hour and unskilled $4.5 per hour. The skilled labour is located in a
machining department and the unskilled labour in an assembly department. A five-day week of 37 ½
hours is worked and each accounting period is for four weeks.
Variable overhead per sub-assembly is A $5, B $4 and C $3.50. At the end of the current year, stocks are
expected to be as shown below but because interest rates have increased and the company utilizes a
bank overdraft for working capital purposes, it is planned of effect a 10% reduction in all finished sub-
assemblies and bought-in stocks during Period 1 of the forthcoming year.
Forecast stocks at current year end:
Sub-assembly
A 300 Copper frames 1,000
B 700 Component D 4,000
C 1,600 Component E 10,000
Component F 4,000
Work-in progress stocks are to be ignored.
Overhead for the forthcoming year is budgeted to be production $728,000, selling and distribution
$364,000 and administration $338,000. These costs, all fixed, are expected to be incurred evenly
throughout the year and are treated as period costs.
Within period 1, it is planned to sell one thirteenth of the annual requirements which are to be the
sales necessary to achieve the company profit target of $6.5 million before tax.
You are required
(a) to prepare budgets in respect of Period 1 of the forthcoming year for
(i) sales, in quantities and value;
(ii) production, in quantities only

22
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

(iii) materials usages, in quantities

(iv) materials purchased, in quantities and value
(v) manpower budget, ie, number of people neded in each of the machining department and
the assembly department;
(b) to discuss the factors to be considered if the bought-in stocks were to be reduced to one week’s
requirement- this has been proposed by the purchasing office but resisted by the production
director.

Q 18.

A company manufactures a single product and has the following flexible production cost budget for a period:

Production quantity 12,000 15,000 18,000

units units units

Direct materials:

Material AB $3,600 $4,500 $5,400

Material CD $17,760 $22,200 $26,196

Labour ( direct and indirect ) $25,700 $29,900 $35,150

Overheads (excluding indirect labour) $12,400 $13,180 $13,960

The budget includes the following assumptions:

(i) Each unit of the product requires:

Material AB 0.2 kg
Material CD 0.4 kg
Direct labour 0.2 hours
(ii) The supplier of Material CD gives a 10% discount on the excess of purchases over 6,000 kg per
period.
(iii) A premium of 25% is paid on the direct labour basic hourly rate on the excess of production over
15,000 units per period
During the period, the company manufactures 17,000 units of the product and incurred the
following production costs:
Direct materials:
Material AB $5,025
Material CD $25,118
Labour (direct and indirect) $32,889
Overhead (excluding indirect labour) $13,315
Required:
(a) Outline the difference between a flexible budget and fixed budget.

23
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

(b) Calculate the budgeted cost per kg of Material CD on the excess of purchases over 6,000 kg
per period.
(c) Prepare a statement for the period showing for each of the four items of cost (i.e. Material
AB, Material CD, labour and overhead).
(i) The flexible budget allowance
(ii) The actual amount incurred
(iii) The variance
(d) The purchase price of Material AB in the period was as per budget.
Calculate the material usage variance (in kg) for Material AB

Q 19.

A company manufactures two product (X & Y) using four types of raw material (A, B, C & D) and one grade
of direct labour.

Production in the period just ended, during which a total of 1,480 direct labour hours were worked, was:

Product X Product Y

(units) (units)

Actual 30,000 20,000

Budget 28,000 20,000

Production budget (units of output and requirements for raw materials and direct labour) are to be
prepared for the next period. The sales budget and the finished goods stock budget for the next period
have already been prepared as follows:

Product X Product Y

(units) (units)

Sales 34,000 20,000

Finished goods stock:

Beginning of period 3,100 2,700

End of period 3,200 2,600

The stock (total kg) of raw Materials A, B, and D is planned to remain unchanged in the next period.
However, the stock of Material C, currently 140 kg, is considered to be too low. An increase of 50% is to
be budgeted.

Standards have been set for raw material usage and labour efficiency as follows:

(i) Raw material content of final product:

Product X Product Y
(kg/unit) (kg/unit)

24
 Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Material A 0.10 0.10

Material B 0.20 0.15
Material C 0.16 -
Material D - 0.30
(ii) Losses occur in the preparation of Material A prior to its use in the manufacturer of the two
products. The standard preparation yield is 80%.
(iii) Ideal standards have been set for direct labour efficiency;
Product X 0.02 hours per unit
Product Y 0.035 hours per unit

Achievement of an efficiency ratio of 90% (compared with the ideal standard) is to be budgeted for the next
period.

Required:

(a) Calculate, for the period just ended, the direct labour efficiency ratio achieved (measured against
the ideal standard).
(b) Prepare the following budgets for the next period:
(i) Production (units of each product)
(ii) Direct labour (hours)
(iii) Raw material usage (kg of each material),
(iv) Raw material purchase (kg of each material).

Q20.

Francis Limited manufactures and sells 2 products only, F3 and F4. They are manufactured in 2 processes, cost
center 14 and 15. The products must be manufactured to high standards, and as a result reject rates are high,
particularly in cost centre 14.

At the beginning of year 12, stocks of each product were:

F3 F4

Finished stocks: units ready for sales 900 200

$58,500 $10,200

Work-in progress: good units at of cost center 14 100 40

$5,800 $1,280

The sales budget for Year 12 shows 9,400 units of F3 for sales revenue of $705,000, and 12,200 units of F4 for
a sale revenue of $817,400. Finished stocks ready for sale at the end of Year 12 are budgeted as 1,000 units of
F3 and 600 units of F4. Work-in-progress stocks are to be increased to 156 units of F3 and 103 units of F4,
completed in cost center 14 and ready to be passed to cost center 15.

Reject rate arising from an inspection at the each of cost center’s work are:

25
 Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

F3 F4

End of cost center 14 20% 30%

End of cost center 15 5% 10%

Manufacturing times per units in each cost center are budgeted as:

F3 F4

Cost center 14 1.20 hours 0.40 hours

Cost center 15 0.90 hours 1.50 hours

The material cost for each unit made cost $35 for a unit of F3 and $20 for a unit of F4. There is no recoverable
cost from any kind of scrap.

Conversion costs are budgeted as:

Cost center 14 15

$ $

Variable per hour 6.50 4.90

Fixed-in total 104,040 123,000

Required:

Prepare:

(a) The production budget

(b) Cost center utilization budgets (in hours)
(c) Conversion cost budgets.
(d) Materials cost budget.
(e) Production costs, using absorption costing.
(f) A profit and loss accounts showing the production profit for each products and in total. A FIFO flow of costs
can be assumed.

Q21.

The following figures have been extracted from a manufacturing company’s budget schedules:

Sales Wages and Purchases of Production Selling and

salaries materials overhead administration
overhead

$000 $000 $000 $000 $000

20X2 Oct 1,200 55 210 560 125

20X2 Nov 1,100 50 280 500 125

26
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

20X2 Dec 1,000 65 240 640 125

20X3 Jan 1,400 60 210 560 125

20X3 Feb 1,200 60 240 500 130

20X3 Mar 1,100 60 230 560 130

Other relevant information:

(1) All sales are on credit terms of net settlement within 30 days of the date of the sale.

However, only 60% of indebtedness is paid by the end of the calendar month in which the sale is made.
Another 30% is paid in the following calendar month;
5% in the second calendar month after the invoice date;
And 5% become bad debts.
(2) Assume all months are of equal number of 30 days for the allocation of the receipts from debtors.
(3) Wages and salaries are paid within the month they are incurred.
(4) Creditors for materials are paid within the month following the purchase.
(5) Of the production overhead, 35% of the figure represents variable expenses which are paid in the month
after they were incurred. $164,000 per month is depreciation and is included in the 65% which
represents fixed costs. The payment of fixed cost is made in the month in which the cost is incurred.
(6) Selling and administration overhead which is payable is paid in the month it is incurred. $15,000 each
month is depreciation.
(7) Corporation tax of $750,000 is payable in January.
(8) A dividend is payable in March: $500,000 net
(9) Capital expenditure commitments are due for payment: $1,000,000 in January and $700,000 in March.
(10) Assume that overhead facilities, if require, are available.
(11) The cash at bank balance at 31 December is expected to be $1,450,000.

You are required:

(a) to prepare, in columnar form, cash budgets for each of the months of January, February and March
(working to nearest $000);
(b) to recommend action which could be suggested to management to affect
(xii) a permanent improvement in cash flow and
(xiii) a temporary solution to minimize any overdraft requirements revealed by your answer to
(a) above.

27
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Q 22. Intensive 2.5

You work in a small accounting practice as a client services manager providing advice and assistance to
clients on management accounting and general business issues. Shown below is a copy of the management
accounts for a client, a business selling and installing low cost domestic water filters, for the year just ending.
The client has asked that you prepare for him a budget profit or loss account and balance sheet for the
coming year, 20X8. To assist in this process, he has given you the following information:

(a) Traditionally selling prices have been set at a mark up of 100% on cost, and so the $50 unit cost of a
filter in 20X7 resulted in a selling price of $100 per unit. An increase in the cost of silver which is
used in water filters has resulted in a large increase in the cost of filters for 20X8 which will be
difficult to pass fully on to the customer. As a result, the client believes it essential to move away
from the traditional cost-plus method of pricing to one based on demand for the product. After
discussions with suppliers and similar businesses operating in other areas and from his prediction of
the likely increased selling prices of competitors, the client believes that the following unit sales are
likely to result from three possible levels of sales price per unit:
Price Estimated annual demand (units)
$
100 2,300
110 2.000
120 1,700
(b) The purchase cost of water filters is subject to quantity discounts and his best available information
suggests that the cost per filter based on the quantities needed would be:
Annual quantity required (units) Cost ($)
2,300 57.50
2,000 60.00
1,700 62.50

(c) The 20X7 expenses cost of $84,000 is estimated as comprising $40,000 of fixed costs and $20 per
unit sold of variable costs. Inflation is expected to increase fixed and variable expense costs by an
average of 10% for 20X8.
(d) Typically two months’ supply of filters are kept in stock and customers take on average two months
to pay. The client obtains an average of one month credit from the filter supplier. Expenses are
usually paid in the month in which they are incurred.
(e) The client is planning to spend $30,000 on new capital equipment during 20X8. Fixed assets are
depreciated by 10% per annum on the written-down value. There are no planned disposals of fixed
assets during the year.

Profit and loss year ended 31 December 20X7

28
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Units Value
$ $
Sales income 2,200 100 220,000
Cost of sales 2,200 50 110,000
Gross profit 110,000
Expenses 84,000
Depreciation 10,000
Operating profit 16,000

Balance Sheet as at 31 December 20X7

$ $
Fixed assets
90,000
Current assets
Stock 18,333
Debtors 36,667
Cash 12,500
67,500
Current liabilities
Creditors 16,167
Net current assets 51,333
Net total assets 141,333

Capital employed 141,333

Return on net assets 11.32%

Required:
(a) From the information provided prepare a 20X8 forecast profit and loss account, balance sheet and cash
flow budget for your client. You should choose the budget forecast option which maximizes profit for
the year.
(b) Provide a short report for your client commenting on his plans for 20X8. Your support should include
reference to the pricing policy being adopted, the forecast profitability for 20X8 and any other
observations which you feel would be helpful.

29
 Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Q23.

A company manufactures a single product and has the following flexible production cost budgets for a period:

Production quantity 12,000 units 15,000 units 18,000 units

Direct Materials

Material AB $3,600 $4,500 $5,400

Material CD $17,760 $22,200 $26,196

Labour (direct and indirect) $25,700 $29,900 $35,150

Overheads (excluding indirect labour) $12,400 $13,180 $13,960

The budget includes the following assumptions:

(vi) Each unit of the product requires:

Material AB 0.2 kg
Material CD 0.4 kg
Direct labour 0.2 hour
(vii) The supplier of Material CD gives a 10% discount on the excess of purchases over 6,000 kg per period.
(viii) A premium of 25% is paid on the direct labour basic hourly rate on the excess of production over
15,000 units per period

During the period, the company manufactured 17,000 units of the product and incurred the following
production costs:

Direct Materials:

Material AB $5,025

Material CD $25,118

Labour (direct and indirect) $32,889

Overhead (excluding indirect labour) $13,315

Required:

(a) Outline the difference between flexible budget and a fixed budget
(b) Calculate the budgeted cost per kg of Material CD on the excess of purchases over 6,000 kg per period.
(c) Prepare a statement for the period showing for each of the four items of cost (i.e. Material AB, Material
CD, labour and overhead). Flexible Budget, Actual Amount and Variances.
(d) The purchase price of Material AB in the period was as per budget. Calculate the material usage variances
(in Kg) for the Material AB

Q24.
You are employed by a firm of Certified Public Accountant. One of your clients, David Brown, is about to
start a business, Lux Ltd making and selling decorative candles. He anticipates that he will need a band
overdraft facility. Candle sales tend to be seasonal in the UK, most sales occurring in the autumn months.
He hopes, however, that once the business is established he will be able to export some candles throughout
the year. The bank manager has asked for a budgeted income statement and cash flow forecast for the six
months ending 31 December 20X9. At your request, David has drawn up estimates of the likely sales and
costs for the first six months of trading, commencing on 1 July 20X9.
30
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

The production process is relatively straight forward. David intends to employ one full time member of staff
and use a number of part-time workers as necessary. He plans to spend his own time on selling and
administration.
He has provided the following information.
1. Premises suitable for production have been acquired and these will be occupied from 1 July 20X9.
Rent of $600 is payable quarterly, on the first day of each quarter.
2. Production equipment costing $20,000, payable two months after delivery, will be installed in the
first week of July.
3. David’s estimates for sales and stock levels are as follows.
Stock at Month end Sales
candles candles

July 2,000 -

August 6,000 -

September 10,000 4,400

October 6,000 9,000

November 4,000 6,800

December 3,000 3,000

4. The cost of raw materials for each candle is $0.60. No stocks of raw material will be kept. Purchases
are to be paid in the month of flowing delivery.
5. All workers will be paid $0.5 per candle produced, paid in the same months as production. David
has no plans to draw a salary from the business at present.
6. Cash expenses are estimated at $400 per month -$250 for production expenses and $150 for
administration and distribution expenses.
7. The selling price will be $1.65 per candle. All sales will be made to retail shops. Customers will be
allowed two months credit, as is customary practice in this trade.
8. David will invest $25,000 of his own savings as share capital in the business. A friend will lend the
business another $10,000, but requires interest to be paid each month equivalent to a rate of 15%
per annum. Both amounts will be paid into the business on 1 July 20X9.
9. Depreciation should be provided on the production equipment using a straight-line basis at an
annual rate of 20%.
10. For the purpose of budgeting, interest payable or receivable on bank balances should be ignored at
this stage (only interest arising on the loan in note 8 should be provided).
11. You have suggested to David that for the purpose of producing management accounts a marginal
costing system is used. The stock of finished candles at 31 December 20X9 is to be valued on the
basis of prime cost only.

Required:

(a) Prepare the following budgets for the six months ending 31 December 20X9:
(i) a production budget for each of the six months
(ii) a production cost budget for the six month period
(iii) a budgeted profit and loss account for the period
(b) Prepare a cash flow forecast for each month of the business until 31 December 20X9.

31
 Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Q25.

Noble is a restaurant that is only open in the evenings, on SIX days of the week. It has eight restaurant
and kitchen staff, each paid a wage of $8 per hour on the basis of hours actually worked. It also has a
restaurant manager and a head chef, each of whom is paid a monthly salary of $4,300. Noble’s budget
and actual figures for the month of May was as follows:

Budget Actual
Number of meals 1,200 1,560
$ $ $ $
Revenue: Food 48,000 60,840
Drinks 12,000 11,700
––––––– ––––––––
60,000 72,540
Variable costs:
Staff wages (9,216) (13,248)
Food costs (6,000) (7,180)
Drink costs (2,400) (5,280)
Energy costs (3,387) (3,500)
(21,003) (29,208)
––––––– ––––––––
Contribution 38,997 43,332
Fixed costs:
Manager’s and chef’s pay (8,600) (8,600)
Rent, rates and depreciation (4,500) (13,100) (4,500) (13,100)
––––––– –––––––– ––––––– ––––––––
Operating profit 25,897 30,232
––––––– ––––––––
The budget above is based on the following assumptions:

1 The restaurant is only open six days a week and there are four weeks in a month. The average number of
orders each day is 50 and demand is evenly spread across all the days in the month. 50 x 6 x 4 = 1200

2 The restaurant offers two meals: Meal A, which costs $35 per meal and Meal B, which costs $45 per meal.
In addition to this, irrespective of which meal the customer orders, the average customer consumes four
drinks each at $2·50 per drink. Therefore, the average spend per customer is either $45 or $55 including
drinks, depending on the type of meal selected. The May budget is based on 50% of customers ordering
Meal A and 50% of customers ordering Meal B.

3 Food costs represent 12·5% of revenue from food sales.

4 Drink costs represent 20% of revenue from drinks sales.

5 When the number of orders per day does not exceed 50, each member of hourly paid staff is required to
work exactly six hours per day. For every incremental increase of five in the average number of orders per
day, each member of staff has to work 0·5 hours of overtime for which they are paid at the increased rate of
$12 per hour. You should assume that all costs for hourly paid staff are treated wholly as variable costs.

6 Energy costs are deemed to be related to the total number of hours worked by each of the hourly paid staff,
and are absorbed at the rate of $2·94 per hour worked by each of the eight staff.

Required:

32
 Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

(a) Prepare a flexed budget for the month of May, assuming that the standard mix of customers remains the
same as budgeted.
(b) After preparation of the flexed budget, you are informed that the following variances have arisen in relation
to total food and drink sales:
Sales mix contribution variance $1,014 Adverse
Sales quantity contribution variance $11,700 Favorable
Required:
BRIEFLY describe the sales mix contribution variance and the sales quantity contribution variance. Identify
why each of them has arisen in Noble’s case.
(c) Noble’s owner told the restaurant manager to run a half-price drinks promotion at Noble for the month of
May on all drinks. Actual results showed that customers ordered an average of six drinks each instead of the
usual four but, because of the promotion, they only paid half of the usual cost for each drink. You have
calculated the sales margin price variance for drink sales alone and found it to be a worrying $11,700 adverse.
The restaurant manager is worried and concerned that this makes his performance for drink sales look very
bad.

Required:

Briefly discuss TWO other variances that could be calculated for drinks sales or food sales in order to
ensure that the assessment of the restaurant manager’s performance is fair. These should be variances
that COULD be calculated from the information provided above although no further calculations are
required here.

Q26.
Peter Blair has worked for some years as a sales representative, but has recently been made
redundant. He intends to start up in business on his own account, using $15,000 which he currently
has invested with a building society. Peter maintains a bank account showing a small credit balance,
and he plans to approach his bank for the necessary additional finance. Peter asks you for advice
and provides the following additional information.

(a) Arrangements have been made to purchase non-current assets costing $8,000. These will be
paid for at the end of September and are expected to have a five-year life, at the end of which
they will possess a nil residual value. 8000/5 x 1/12
(b) Inventories costing $5,000 will be acquired on 28 September and subsequent monthly
purchases will be at a level sufficient to replace forecast sales for the month.
(c) Forecast monthly sales are $3,000 for October, $6,000 for November and December, and
$10,500 from January 20X4 onwards.
(d) Selling price is fixed at the cost of inventory plus 50%.
(e) Two months' credit will be allowed to customers but only one month's credit will be received
from suppliers of inventory.
(e) Running expenses, including rent but excluding depreciation of non-current assets, are
estimated at $1,600 per month.
(f) Blair intends to make monthly cash drawings of $1,000
Required
Prepare a cash budget for the six months to 31 March 20X4.

33
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Q27.
A company manufactures and sells a single product. The following information is available:
Sales:
The budgeted sales volume for year 2020 for the product includes the following.
Month Units
January 520
February 540
March 560
April 560
May 540
The standard selling price is Ks 20 per unit. The sales volume in December of year 2019 is expected
to be 480 units at the standard price.
20% of sales are expected to be cash sales with the remaining customers allowed one-month credit.
It is estimated that 5% of the credit sales will be bad debts.
Production:
The company manufactures 60% of budgeted sales during the month before sale and the remaining
40% in the month of sale.
Cost:
(1) Direct material will be purchased at Ks 5 per unit of finished product, in the month prior to
their use in production, and paid in the month following purchase.
(2) Direct labour will be paid at a rate of Ks 3 per unit of finished product, payable in the month of
production. A bonus payment of Ks 1.50 per unit will be paid on all additional monthly
production in excess of 500 units, paid in the month following production.
(3) Fixed production overheads of Ks 20,000 per year, including depreciation of Ks 6,800, are
budgeted to be the same each month and, apart from depreciation, are paid in the month they
are incurred.
(4) Variable production overheads are expected to Ks 1.5 per unit payable in the month incurred.
(5) Variable selling overheads are expected to Ks 2 per unit payable in the month of sales.
(6) Fixed administration overheads of Ks 6,000 per year are budgeted to be the same per month
and payable in the month they are incurred.
Cash
The company expects to have a bank overdraft balance of Ks 2,000 at the start of year 2020.

Required:
Prepare the cash budget for each of months January to March of year 2020.

34
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Q28.
Shwe Sin Engineering Company (SS Co.) makes metal chassis components for use in a range of
consumer electrical products such as refrigerators and washing machines. Media Electronic is a
major customer of SS Co., and they are looking to reduce their own production costs. They currently
purchase 40,000 units per year of product MC112 from SS Co., and are the sole customer for this
product. They have approached SS Co., with an offer of a substantial increase in order size in return
for an improved discount on the current price. SS Co., currently sells product MC112 for Kyat 220
per unit. Product MC112 is produced in one particular section of the factory and the standard cost
is as follows:
Direct materials
Steel 4 kgs @ Kyat 15.00 per kg
Fastenings 10 @ Kyat 4.00 each
Direct labour
Skilled 1 hour @ Kyat 21
Unskilled 1 hour @ Kyat 14
Fixed costs for the section total kyat 23,000 per month.
Included in the fixed costs are wages for two supervisors. An additional supervisor would be
needed, at a cost of Kyat 36,000 per annum, for production volume in excess of 50,000 units per
annum. Media Electronic has suggested that for a discount of 5% they would be willing to
guarantee orders of 48,000 units per annum and for a discount of 10% they would be willing to
guarantee orders of 56,000 units. SS Co., does not hold any stock of product MC112.
Required:
Calculate the following annual figures for output levels of 40,000, 48,000 and 56,000 units of
product MC112:
(i) Sales revenue
(ii) Cost of direct materials
(iii) Cost of direct labour
(iv) Total contribution
(v) Fixed costs
(vi) Total profit

The following data relate to a manufacturing company:

Plant capacity: 40,000 units per annum
Present utilization: 40%
Actual for the year were:
Selling price Kyat 50 per unit
Material cost Kyat 20 per unit
Variable manufacturing costs Kyat 15 per unit
Fixed costs Kyat 27 lakhs
35
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

In order to improve capacity utilization, the following proposals are being considered:
Reduced selling price by 10%.
Spend additional Kyat 3 Lakhs on sales promotion.
Required:
How many units should be made and sold in order to earn a profit of Kyat 5 lakhs per year
Q29. CPA Old Question Part I 2018
A company deals in manufacturing and marketing of Plastic Boxes. The management of the
company is in the phase of preparation of budget for the year 2018-2019. The company has
production capacity of 4 million boxes per annum. Currently the factory is operating at 68% of the
capacity. The results for the recently concluded year are as follows:
Ks in million
Seles 3,400
Cost of goods sold
Materials (1,493)
Labour (367)
Manufacturing overheads (635)
Gross profit 905
Selling expenses (60% of variable) (287)
Administration expenses (100% fixed) (105)
Net profit before tax 513

Other relevant information is as follows:

(i) The raw material and labour costs are expected to increase by 5%, while selling and
distribution costs will increase by 4% and 8% respectively. All overheads and fixed expenses
except depreciation will increase by 5%
(ii) Manufacturing overheads include depreciation of Ks 285 million and other fixed overheads
of Ks 165 million. During the year 2018-19 major overhaul of a machine is planned at a cost
of Ks 35 million, which will increase the remaining life from 5 to 12 years. The current book
value of the machine is Ks 40 million and it has a salvage value of Ks 5 million. At the end of
12 years, salvage value will increase on account of general inflation to Ks 9 million. The
company uses straight-line method for depreciating the assets.
(iii) Variable manufacturing overheads are directly proportional to the volume of production.
(iv) Selling expenses include distribution expenses of Ks 85 million, which are variable.
(v) Administration expenses include depreciation of Ks 18 million. During 2018-19 an asset
having book value of Ks 1.5 million will be sold at Ks 1.8 million. No replacement will be
made during the year. Depreciation for the year 2018 – 19 would reduce to Ks 17 million.
The management has planned to take following steps to increase the sale and improve cost
efficiency:
• Increase selling price by Ks 150 per unit.
36
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

• The sales are to be increased by 25%. To achieve this, commission on sales will be
introduced besides fixed salaries. The commission will be paid on the entire sale and the
rate of commission will be as follows:
No. of units Commission % on total sales
Less than 35,000 1.00%
35,000 – 40,000 1.25%
40,000 – 50,000 1.50%
Above 50,000 1.75%
Currently the sales force is categorized into categories A, B and C. Number of persons in each
category is 20, 30 and 40 respectively. Previous data show that total sales generated by each
category is same. Moreover, sales generated by each person in a particular category is also the
same. The trend is expected to continue in future.
• The overall efficiency of the workforce can be increased by 15% if management allows a
bonus of 20%. Further increase in production can be achieved by hiring additional labour at
Ks 180 per unit.
Required:
Prepared profit and loss budget for the year 2018 – 2019
Q 30. Intensive Budget Q2.7 ZBB Ltd
ZBB Ltd has two service departments, material handling and maintenance, which are competition for budget
funds which must not exceed $925,000 in the coming year. A zero base budgeting approach will be used
whereby each department is to be treated as a decision package and will submit a number of levels of
operation showing the minimum level at which its service could be offered and two additional levels which
would improve the quality of the service from the minimum level.
The following data have been prepared for each department showing the three possible operating levels of
each:
Material handling department
Level 1. A squad of 30 labourers would work 40 hours per week for 48 weeks of the year. Each labourer
would be paid at basic rate of $4 per hour for a 35-hour week. Overtime hours would attract a premium of
50% on the basic rate per hour. In addition, the company anticipates payments of 20% of gross wages in
respect of employee benefits. Directly attributable variable overheads would be incurred at the rate of 12p
per man hour. The squad would move 600,000 kilos per week to a warehouse at the end of the production
process.
Level 2. In addition to the level 1 operation, the company would lease 10 fork lift trucks at a cost of $2,000
per truck per annum. This would provide a better service by enabling the same volume of output as for level
1 to be moved to a customer collection point which would be 400 metres closer to the main factory gate.
Each truck would be manned by a driver working a 48 week year. Each driver would receive a fixed weekly
wage of $155.
Directly attributable overheads of $150 per truck per week would be incurred.

37
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Level 3. A computer could be leased to plan the work of the squad of labourers in order to reduce their total
work hours. The main benefit would be improvement in safety through reduction in the time that work in
progress would lie unattended. The computer leasing costs would be $20,000 for the first quarter (3
months), reducing by 10% per quarter cumulatively thereafter.
The computer data would result in a 10% reduction in labourer hours, half of this reduction being a saving
in overtime hours.

Maintenance department

Level 1. Two engineers would each be paid a salary of $ 18,000 per annum and would arrange for repairs to
be carried out by outside contractors at an annual cost of $ 250,000.

Level 2. The company would employ a squad of 10 fitters who would carry out breakdown repairs and routing
maintenance as required by the engineers. The fitters would each be paid a salary of $11,000 per annum.
Maintenance materials would cost $48,000 per annum and would be used at a constant rate through the
year. The purchases could be made in batches of $4,000, $8,000, $12,000 or $16,000. Ordering costs would
be $100 per order irrespective of order size and stock holding cots would be 15% per annum. The minimum
cost order size would be implemented.
Overheads directly related to the maintenance operation would be a fixed amount of $50,000 per annum.
In addition to the maintenance squad, it is estimated that $160,000 of outside contractor work would still
have to be paid for.
Level 3. The company could increase its maintenance squad to 16 fitters which would enable the service to
be extended to include a series of major overhauls of machinery. The additional fitters would be paid at the
same salary as the existing squad members.
Maintenance materials would now cost $96,000 per annum and would be used at a constant rate throughout
the year. Purchases could be made in batches of $8,000, $12,000, or $16,000. Ordering costs would be $100
per order (irrespective of order size) and stock holding costs would now be 13.33% per annum. In addition,
suppliers would now offer discounts of 2% of purchase price for orders of $16,000. The minimum cost order
size would be implemented.
Overheads directly related to the maintenance operation would increase by $20,000 from the level 2 figure.
It is estimated that $90,000 of outside contractor work would still have to be paid for.
Required:
(a) Determine the incremental cost for each of levels 1, 2 and 3 in each department.
(b) In order to choose which of the incremental levels of operation should be allocated the limited budgeted
funds available, management have estimated a ‘desirability factor’ which should be applied to each
increment. The ranking of the increments is then based on the ‘incremental cost X desirability factor’
score, whereby a high score is deemed more desirable than a low score. The desirability factors are
estimated as:
Material handling Maintenance

Level 1 1.00 1.00

38
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Level 2 (incremental) 0.60 0.80

Level 3 (Incremental) 0.50 0.20

Use the above ranking process to calculate which of the levels of operation should be implemented in
order that the budget of $925,000 is not exceeded. (3 marks)

(c) Comment on factors which should be taken into account in practice in arriving at the decision as to the
ranking of the various levels of operation.

Q 31. CPA I 46Batch 2023

(a) A company is to carry out major modernization of its factory commencing in two weeks’ time. During
the modernization, which is expected to take four weeks to complete, no production of the company’s
single product will be possible.

The following additional information is available:

Sales / Debtors
Demand for the product at Ks 100 per unit is expected to continue at 800 units per week, the level of
sales achieved for the last four weeks, for one further week. It is then expected to reduce to 700 units
per week for three weeks, before rising to a level of 900 units per week where it is expected to remain
for several weeks.
All sales are on credit, 50% being received in cash in the week following the week of sale and 50% in
the week after that.
Production / Finished goods stock:

Production will be at a level of 1,200 units per week for the next two weeks. Finished goods stock is
2,800 units at the beginning of week 1.

Raw material stock:

Raw material stock is Ks 36,000 at the beginning of week 1. This will be increased by the end of week
1 to Ks 40,000 and reduced to Ks 10,000 by the end of week 2.

Costs
Ks per unit
Raw material 35
Direct labour 20
Variable overhead 10
Fixed overhead 25

Fixed overheads have been apportioned to units on the basis of the normal output level of 800 units per
week and include depreciation of Ks 4,000 per week.

In addition to the above unit costs, overtime premiums of Ks 5,000 per week will be incurred in weeks 1
and 2. During the modernization variable costs will be avoided, apart from direct labour which will be
incurred at the level equivalent to 800 units production per week. Outlays on fixed overheads will be
reduced by Ks 4,000 per week.

Payments
39
Budget USN (CPA Gold Medalist, Dip IFR Gold Medalist)

Creditors for raw materials, which stand at Ks 27,000 at the beginning of week 1, are paid in the week
following purchase. All other payments are made in the week in which the liability is incurred.

Liquidity

The company has a bank overdraft balance of Ks 39,000 at the beginning of week 1 and an overdraft limit
of Ks 50,000.

The company is anxious to establish the liquidity situation over the modernization period; excluding the
requirements for finance for the modernization itself.

Required:

Prepare a weekly cash budget covering the six weeks period up to the planned completion of the
modernization.

40