BUDGETING

1.

Gama engineering co. manufactures two products X and Y. An estimate of the no. of units expected to be sold in the first seven months of 2008 is given below: Product X Product Y January 500 1400 February 600 1400 March 800 1200 April 1000 1000 May 1200 800 June 1200 800 July 1000 900 It is anticipated that Finished goods equals to half the anticipated sales for the next month will be in stock at the end of the each month (including December 2007). Budgeted production and production costs for the year 2008 are as follows: Product X Product Y Production (units) 11, 000 12, 000 Direct material per unit 12 19 Direct wages per unit 5 7 Other manufacturing variable exp 33, 000 48, 000 You are required to prepare Production budget showing no. of units to be manufactured each month. A summarized production costs budget for the six month period jan to june

As a MBA of modern manufacturing company you are asked to prepare a quarterly production budget and direct material purchase budget for the accounting year july 2002 to June 2003. the company manufactures only two products A and B. The sales volume forecast (in units) 2002-03 Product A Product B Q. I 1500 2000 Q. II 1000 2500 Q. III 1000 2000 Q. IV 1500 2500 2003-04 Q. I 1500 2500 Raw material requirement forecast : the standard quantities of the two raw materials X and Y which should be used in the manufacture of the two products and the prices of these raw materials have been estimated as follows: Standard quantities Estimated costs R. M. X 2 units for each unit of Product A R. M. X - Rs. 10 for each unit of A R. M. Y 3 units for each unit of Product B R. M. Y - Rs. 6 for each unit of B 5% is provided to cover spoilage and scrap in the case of material X and 4% in the case of material y. Estimated opening stock (units) : Product A 750, Product B 1250 Raw material X 1578 and Raw material Y 3900 units. It is planned that the closing stock level at the end of each quarter should be maintained at a level equal to half the expected sales for the next quarter for both the products and raw materials stock at the end of each quarter should be held accordingly.

You are required to prepare sales overhead budget from the estimates given below: Advertisement 2, 50, 000 Salaries of the sales dept 5, 00, 000 salaries of finance mgr 3,00,000 general expenses 1,00,000 Expenses of sales dept 1, 50,000 Counter sales man salaries 6, 00, 000 Commission to counter sales man at 1% of their sales Traveling sales man commission at 10% on their sales and expenses at 5% on their sales. The sales during the period were estimated: Counter sales traveling salesman 80, 00, 000 10, 00, 000 1, 20, 00, 000 15, 00, 000 1, 40, 00, 000 20, 00, 000

A newly started company wishes to prepare cash budget from January. Prepare a cash budget for the first 6 months from the following estimates (figures in lakhs): Month sales material wages production selling & dist January 20 20 4 3. 20 0. 80 February 22 14 4. 40 3. 30 0. 90 March 24 14 4. 60 3. 30 0. 80 April 26 14 4. 60 3. 40 0. 90 May 28 12 4. 80 3. 50 0. 90 June 30 16 4. 80 3. 60 1. 00 Cash balance on 1st January was Rs. 10 lakhs. A new machine is to be installed at rs. 30 lakhs on credit to be repaid by two instalments in march and april. Sales commission @ 5% on total is to be paid with in the month following the actual sales. Rs. 10 lakhs being the amount of 2nd call may be received in march. Share premium amounting to Rs. 2 lakhs is also obtainable with 2nd call. Period of credit allowed by suppliers 2 months Period of credit allowed to customers 1 month Delay in payment of overhead 1 month Delay in payment of wages 1 month

SM ltd furnishes the following forecast for the quarter ending 31st march, 2003. Sales January 12, 00, 000 February 11,00, 000 March14,00, 000 During the month of December last the company made a sale of Rs. 10 lakhs and computed the cost of sales as under: Raw material 3, 50,000 wages 1,75,000 overhead (variable) 1,75,000 overhead fixed 1,50, 000 The fixed overhead include depreciation of Rs. 40,000. One-fifth of sales is for cash on which a cash discount of 1. 50% is allowed. Of the remaining portion 50% is collected in the same month and the balance in the next month. Raw material suppliers allow a credit of one month. Wages are paid on the last working day of the month to which they relate. While variable overheads are paid in the next month, fixed expenses are met in the same month. The % of contribution to sales as obtained in December last is expected to be maintained during the forthcoming quarter also. The cash balance on 1. 1. 2003 is Rs. 50,000. The company has to pay a sum of Rs. 60,000 as instalment of arrears of wages in march 2003 and the bank will debit

A glass manufacturing company requires you to calculate and present the budget for the next year from the following information: Sales : Toughened glass 3 crores Bent toughened glass 5 crores Direct material cost 60% of sales Direct wages 20 workers @ Rs. 15000 per month Works manager salary 50,000 p. m. Foreman 40,000 p. m. Stores and spares 2 % on sales Depreciation on machinery 12,60,000 Light and power 5,00,000 Repairs and maintenance 8,00,000 Other sundries 10% on direct wages Administration and selling & distribution 14,00,000 p. a.