Budgeting

Questions on Budgeting (Cost Accounting)

Budgeting Question 1

CharllyCARES Nig Ltd sells one product, in the year 2010, his budget income statement shows the following:

  • Sales; 5,000 units at N2 per unit
  • Cost; Fixed cost N4,000 will remain constant during the year
  • Variable Cost; N1 per unit

The management of the company has concluded that the budget does not meet the company’s profit so they are considering 3 options.

  • Option A, Increase price by 10%
  • Option B, Increase sales volume by 105
  • Option C, Increase price by 10% and volume by 5% and a fixed cost of N100

Required

Decide for CharllyCARES Nig Ltd the alternative consider.

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See also: YouTube Video Of The Cash Budget

Budgeting Question 2

CdyCRAFTS Limited is currently planning operations for the half-year ending 31/12/2006. The company provides you with the following data:

budgeting

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2) The cash book balance as at 31/6/2006 is expected to be N95,000.

3) 40% of sales are by cash while the remainder is by credit which is received three months after-sales.

4) 50% of purchases are by cash while the remainder is on credit. The credit purchases are paid two months after the purchases.

5) The salary is N15,000 per month and is paid monthly.

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6) The company intends to acquire a factory, costing N1,200,000 on 1/10/2005 to be paid at an equal installment of twelve months starting from the date of acquisition.

7) Sales commission is 6% of sales and paid two months after-sales.

Required:

Prepare a cash budget on a monthly basis and in total for the half-year ending 31/12/2006

Watch the solution to this question in the video below.