AGyawali, Associate Professor Central Department of Management, TU. manufacturing company are summarie! Probl Problem em 1. The sales forecasts relating to a manufacturing below" Sales (in units)
Shrawan 20,000
Bhadra 30,000
Aswin 40,000
Kartik 30,000
#elling price per unit is $s.%&. 'ach unit of output nee!s % units of raw materials an! each unit of raw materials will cost $s.%. (abour cost an! factory o)erhea!s are $s.* per unit. #elling an! !istribution e+penses are %& of sales. The company-s policy is to eep e/ual units of output re/uire! re/uire! for the ne+t month-s sale an! uniform materials in)entory of 0&,&&& units. & of sales are ma!e in cre!it an! the rest in cash. 2& of the cre!it sales are collecte! in the same month an! the rest in the ne+t month. Purchases an! e+penses are pai! in the months when they become !ue. The Company hol!s a minimum cash balance of $s.%&,&&&. The company has negotiation with its ban for a temporary borrowing in the multiple of $s.1,&&& with interest of 1% p.a. on the loan pai!. Assume that the loans are taen on the 3rst !ate of the month an! repai! on the last !ate. Uncollecte! !ebtor-s of Asha! amounte! to $s.1&&,&&&. 4pening 3nishe! goo!s in)entory an! cash balance were %&,&&& units an! $s.%&,&&& respecti)ely. Required a) Pro!uction bu!get for the 3rst three months. b) Materials purchase bu!get for the 3rst three months. c) Cash bu!get for the 3rst three months.
Question 2. The 2. The past sales, forecaste! sales an! the manufacturing o)erhea! bu!get are presente! below" Schedule I Past and forecasted sales Months Falgun Chaitra Baishakh Jestha Ashadh Shrawan Bhadra Sales in units 20,000 30,000 40,000 40,000 30,000 20,000 30,000
Months Indirect labour.................................. Heat, light and power....................... Supervision...................................... Depreciation....................................
Schedule II Manufacturing overhead budget Baisakh 0,000 20,000 !0,000 !0,000
Jestha "0,000 20,000 !0,000 !0,000
Ashad 40,000 20,000 !0,000 !0,000
120,000
100,000
80,000
#elling price per unit will be $s.%& each. All sales are cre!it sales, an! cre!it sales will be realise! at *& in the month, 0& in the ne+t month5 an! the balance in the ne+t following month of sales. Purchases an! all other e+penses will be pai! in the month of purchases an! the e+penses. 'ach unit of 3nishe! pro!uct will nee! one unit of raw material at a cost of $s.6 an! two !irect labour hours 7 $s.%.2& per hour. The en!ing balance of raw materials materials an! the 3nishe! 3nishe! pro!uct pro!uct will be e/ual units units of raw materials an! 3nishe! pro!ucts necessary to meet the pro!uction an! sales nee! of the ne+t month respecti)ely an! the !esire! en!ing balance of cash $s.%&,&&&.
AGyawali, Associate Professor Central Department of Management, TU. The beginning balances of raw materials an! 3nishe! pro!ucts were 6&,&&& units each an! the cash balance of $s.%&,&&&. Required a) Pro!uction 8u!get b) Material Purchase 8u!get c) Cash Collection an! Disbursement 8u!get Question 3. 9n its process of preparing a bu!get a company prepare! the following bu!gets. Schedule 1 Past sales and sales budget: Months Chaitra Baishakh Jestha Ashadh Shrawan Sales revenue 400,000 "00,000 #00,000 400,000 300,000 %& of sales will be cash an! the remaining & will be cre!it. & of cre!it the sales will be collecte! in the month of sales an! the remaining in the ne+t month of sales. The gross pro3t margin on sales will be 6&. The !esire! en!ing in)entory of merchan!ise will be e/ual to meet the ne+t month:s sales nee! an! a minimum cash balance of $s.%&,&&&. The operating e+penses, selling an! !istribution e+penses will be %& of sales re)enue, the purchases of the month will be pai! in the month of the purchase an! the e+penses. The company inten!s to purchase a )ehicle at a cost of $s.1%&,&&& in the month of 8aisha. The company has approache! a commercial ban for a line of cre!it to meet a temporary !e3ciency of cash. The borrowings will be ma!e in multiples of $s.2,&&& an! the repayments in $s.1,&&& together with an interest of 1 p.a. The cash balance at the en! of Chaitra was $s.%&,&&&. 8eginning in)entory of merchan!ise was $s.0*&,&&&. Required a) Merchan!ise purchase bu!get for the three months en!ing Asha!. b) 4perating selling an! !istribution bu!get for the three months. c) Cash an! collection an! !isbursement bu!get for the three months. Question 4. M;# (in (t!., is a tra!ing company which purchases an! sales merchan!ise manufacture! by other company. The company has a!opte! a bu!getary system in the planning system. The !ata relating to the last /uarter of the year ha)e been presente! below" Sales and Sales Forecast Month #ales in $s.
Augu Septe Octob o!em "ecem st mber er ber ber 6&&,& 2&&,&&& 2&&,& *&&,&& &&,&& && && & &
#an 2$$4 <&&,& &&
All sales will be on cre!it. Cre!it will realie 2& in the month of sales 0& in the ne+t month of the sales an! remaining %& in the ne+t following month of sales. The gross pro3t margin on sales will be 6&. The purchase of merchan!ise an! all other relate! e+penses will be ma!e in the month of purchase an! the e+penses became !ue. The a!ministrati)e an! !istribution e+penses e+clu!ing the !epreciation on o=ce e/uipment of $s.2,&&& per month will be %& of the sales re)enue. Company will retire !ebenture !ebts of $s.%&&,&&& at a premium of 1& in the month of 4ctober an! buy a new computer for $s.2&,&&&.
AGyawali, Associate Professor Central Department of Management, TU. As a policy company will maintain $s.%2,&&& as cash balance an! merchan!ise in)entory necessary to meet ne+t months sales. A line of cre!it at an interest rate of 1% p.a. will be a)ailable from a commercial ban. The borrowing will be in a multiple of 2,&&& an! repayments in $s.1,&&& plus the interest on the amount of principal repai!. Required a> Merchan!ise Purchase 8u!get for last /uarter. b> A!ministrati)e an! Distribution Cost 8u!get for the last /uarter c> Cash collection an! !istribution bu!get for last /uarter Question %. The Manufacturers (t!., in the process of preparing master bu!get has gathere! the following information" SCHE!"E I
Past sales and sales forecasts
$onths Sales in unit Sales revenue
SCHE!"E II
%ov 20,000 400,000
Dec !*,000 300,000
&an 20,000 400,000
'eb 30,000 "00,000
$ar 3*,000 #00,000
pr 40,000 00,000
$a 3*,000 #00,000
Manufacturing overhead cost budget
Months Indirect +aterials Indirect labour Supervision epairs and +aintenance Depreciation -otal
#an 30,000 "0,000 !*,000 !*,000 *,000 !2*,000
$eb 3*,000 #0,000 !#,*00 !#,*00 *,000 !4*,000
Mar 40,000 0,000 20,000 20,000 *,000 !"*,000
2& of sales will be in cash an! balance on cre!it. Cre!it sales will be collecte! as 2& in the month of cre!it sales, 0& in the ne+t month of sales an! balance in the ne+t following month of sales. Purchase will be pai! in the ne+t month of purchases an! all other e+penses will be pai! in the month when they are !ue. #elling an! other e+penses will be $e. 1 per unit of sales. 'ach unit of output will re/uire 1 unit of material an! % hours of !irect labour hours. Direct labour hour will cost $s.% per hour an! each unit of !irect labour hours. Direct labour hour will cost $s.% per hour an! each unit of material will cost $s.6. The raw material in)entory an! 3nishe! goo!s in)entory will be e/ual to ne+t month:s pro!uction nee! an! sales nee! respecti)ely. Company will eep minimum cash balance of $s.1&,&&& each month an! in Dec. last year the cash balance was $s.1&,&&& 3nishe! goo!s an! raw material in)entory at the en! of December were %&,&&& units each. Cre!itors payable for December purchases were of $s.&,&&&. The company will ha)e to retire !ebenture !ebts of $s.1&&,&&& in the month of ?anuary. #oft loan will be a)ailable at an interest rate of 1% per annum from the commercial bans. 8orrowing will be in a multiple of $s.1&,&&& an! repayment will be in $s.2,&&&. The interest will be pai! at the time of repayment on the amount of loan. Required&
AGyawali, Associate Professor Central Department of Management, TU. Material purchase bu!get for 1st three months. 8u!gete! income statement at the en! of March. Cash collection an! !isbursement bu!get for 1 st three months.
1. %. 0.
'roblem (. #tan!ar! manufacturing company e+pects to sell 1%&,&&& units of pro!uct A an! 1&,&&& units of pro!uct 8 in coming year. Pro!uct A an! 8 are sol! for $s. 1% an! $s. 2& each respecti)ely. Annual sales are e+pecte! o)er the 1% months of the year in following percentage. $onths
&an
$ar
'eb
pr
$a
&un
&ul
ug
Sep
ct
%ov
Dec
/ercentage o annual Sales
.0"
.0
.0"
.0"
.04
.02
.!0
.!2
.!4
.!4
.!0
.0
The company policy is to ha)e enough 3nal in)entories each month to 3ll 0& of e+pecte! sales or!er in the ne+t month. 9nitial in)entory in ?anuary is e+pecte! to be 6,2&& units of pro!uct A an! *,&&& units of pro!uct 8. '+pecte! sales for ?anuary in coming year are ,&&& units of pro!uct A an! 1%,&&& units of pro!uct 8.
Required& 1. %.
#ales bu!get by month for each pro!uct an! in total. Pro!uction /uantity bu!get by pro!uct an! time.
'roblem ). A8C Company engage! in manufacturing has forecaste! its sales for the 3rst /uarter as un!er" Month Sales in units
#anuar%
$ebruar%
March
&'ril
!0,000
!*,000
20,000
20,000
The company has a policy of maintaining 3nishe! goo!s in)entory of & of the ne+t month-s re/uire! sales. 'ach units of 3nishe! pro!uct nee!s two types of materials i.e. material A an! material 8. The stan!ar! rate of consumption of these materials for each units of 3nishe! pro!uct are material A, 1 unit an! material 8, % units. The company-s raw material policy is to hol! su=cient units of raw material re/uire! to meet ne+t month-s pro!uction nee!. The stan!ar! material price for material A an! material 8 are $s. % an! $s 0 respecti)ely. The in)entory positions of 3nishe! goo!s an! raw materials at the en! of December are" 'inished goods aw +aterials1
,000 units
Required& Pro!uction bu!get, material consumption bu!get an! material purchase bu!get for three months beginning ?anuary
!4,000 units 2,000 units
AGyawali, Associate Professor Central Department of Management, TU. Micro pro!ucts, 9nc., has !e)elope! a )ery powerful electronic calculator. 'ach calculator re/uires three small @chips@ in its manufacture. The chips cost $s. each an! are purchase! from an o)erseas supplier. Micro Pro!ucts has prepare! a pro!uction bu!get for the calculator by /uarter for 1×2 an! for the 3rst /uarter of 1×*, as5
'roblem *.
19 5 First ",000
udgeted production
Second ,000
19 6 Third !*,000
Fourth !0,000
First #,000
The chip use! in pro!uction of the calculator is often har! to get, so it is necessary for the company to carry large in)entories as a precaution against stoc outs. Bor this reason, the in)entory of chips at the en! of a /uarter must be e/ual to %2 percent of the following /uarter-s pro!uction nee!s. #ome 6,2&& chips will be on han! to start the 3rst /uarter of 1 ×2. Required Prepare a materials purchases bu!get for chip by /uarter an! in total for 1 ×2. #how your bu!get both in number of chips an! in rupees. Ans." Planne! purchase 1" $s.1*%,&&&5 %" $s.%2%,&&&5 0" $s.00&,&&&5 6" $s.%%%,&&&5 Total $s.**,&&& " Planne! purchase of chips units E 1" %&,%2&5 %" 01,2&&5 0" 61,%2&5 6" %<,<2&5 Total 1%&,<2&> 'roblem +. A company pro!uces a pro!uct which passes through !epartments one F two. The pro!uction plan for for a particular year is as follows" Period nits
1st uarter 40,000
!nd uarter *0,000
"rd uarter "0,000
#th uarter 40,000
#tan!ar! labour hours per unit of 3nishe! pro!uct $e%art&ent
Std' la(our hrs'
A)erage wage rate
! 2
0." 0.4
s.4 s.*
Required Direct labour cost bu!get an! !irect labour hour bu!get by !epartments. 'roblem ,$. The e+pen!itures for selling an! !istribution in the last bu!get perio! of a company are5 $escri%tion
Mahakali *+s',
Seti *+s',
Karnal i *+s',
Sales co++is sion.......................................
20,000
30,000
!0,000
Selling e5penses.........................................
!0,000
30,000
*0,000
6arehouse e5penses.................................
!",000
!",000
"0,000
Salar..........................................................
!2,000
20,000
*0,000
dvertis ing e5penses..................................
20,000
20,000
*0,000
(otal))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))
*8,000
11+,000
220,000
Bor the coming year:s bu!get, the following changes are to be allowe!" #ales commission in Garnali !ecreases by 1&. Harehouse e+penses in the case of #eti F Mahaali will increase by 1&. #alaries will increase by $s.2,&&&, $s.1&,&&& F $s.12,&&& for Mahaali, #eti an! Garnali respecti)ely. 9n #eti F Mahaali, a!)ertising e+penses will increase by 1& F %& respecti)ely. #elling e+penses will be !ecrease! by 1& in each area. Iou are re/uire! to prepare the selling e+penses bu!get for the coming year.
AGyawali, Associate Professor Central Department of Management, TU. Required #elling '+penses 8u!get for the coming year.
Problem 11. Prepare a Cash 8u!get of $aJee) F Company for April, May an! ?une %&&" Months
Sales
Purchases
-ages
E.'enses
s)
s)
s)
s)
&an.
(ctual)
0,000
4*,000
20,000
*,000
'eb. $arch
(7)
0,000 #*,000
40,000 42,000
!,000 22,000
",000 ",000
pril $a
(udget) (7)
0,000 *,000
*0,000 4*,000
24,000 20,000
#,000 ",000
&une
(7)
0,000
3*,000
!,000
*,000
(7)
A!!itional information" i>
1& of the purchases an! %& of #ales are for cash.
ii> The a)erage collection perio! of the company is 1;% month an! the cre!it purchases are pai! regularly after one month. iii> Hages are pai! half monthly an! the rent of $s. 2&& inclu!e! in e+penses is pai! monthly. 4ther e+penses are pai! after one month lag. i)> Cash balance on April 1, %&16 may be assume! to be $s. 12,&&&.
'roblem ,2. Prepare a cash bu!get for April?une %&16 from the following information" i>
Actual an! 8u!gete! #ales" &ctual
/udget
&an. 'eb.
s. 0,000 s. 0,000
pril $a
s. 0,000 s. *,000
$arch
s. #*,000
&une
s. 0,000
ii>
Actual an! 8u!gete! Purchases" &ctual
/udget
&an. 'eb.
s. 4*,000 s. 40,000
pril $a
s. *0,000 s. 4*,000
$arch
s. 42,000
&une
s. 3*,000
iii>
Actual an! 8u!gete! Hages an! e+penses" &ctual
/udget
&an. 'eb.
s. 2*,000 s. 24,000
pril $a
s. 3!,000 s. 2",000
$arch
s. 2,000
&une
s. 23,000
i)>
#pecial" A!)ance incometa+ in May $s. 6,&&&, plant in April $s. 1&,&&&.
)>
$ent $s. 0&& payable each month not inclu!e! in wages an! e+penses.
)i>
1& of purchases an! sales are on cash basis.
AGyawali, Associate Professor Central Department of Management, TU. )ii> Cre!it purchases are pai! after one month an! cre!it sales are collecte! after % months. Time lag in wages an! e+penses 1;% month. )iii> 4pening balance of cash on 1 st April %&16 $s 10,&&&.
'roblem ,3. A (t!. company prepares business bu!get to e+ercise control o)er operations. The sales 3gure an! purchase 3gure for recent month an! e+pecte! for ne+t month are as follows" Sales aisha8h &estha shad
Purchase
s.200,000 300,000
&estha shad
s.!#*,000 300,000
3*0,000
Cre!it sales are & of total sales, 2& of cre!it sales are collecte! in the following month an! balance 2& in the ne+t following months of sales. All purchases are cre!it purchases payable in the following month of purchase. 8an loan !ue for Asha! is $s.*&,&&& an! interest !ue is $s.*,&&&. Depreciation for Asha! $s.1&,&&&. Hages !ue for Asha! but payable ne+t month $s.2&,&&& an! other e+penses !ue an! payable in Asha! $s.*&,&&&. Cash balance on 01st ?estha 2&,&&&.
Required& Cash balance showing cash receipt an! !isbursement for the month of Asha!. TU %&2&>
'roblem ,4. A manufacturing company in a process of preparing master bu!get forecaste! the following sales an! also collecte! the actual relate! 3gures of last year. /eginning inventories
/eginning balances
'inished goods $aterial
!0,000 units 30,000 units
ccounts paable 9ash balance
$aterial
40,000 units
ccounts receivable
s.*0,000 s.20,000 40,000 (s.!0,000 o 'algun and s.30,000 o 9haitra sales)
Sales forecasts $onths Sales in units
aisa8h !0,000
&estha !*,000
shad
Shrawan
hadra
!*,000
20,000
20,000
#ales are mostly on cre!it. 2& of sales will realie on the month of sales, 0& in the ne+t month an! remaining %& in the following ne+t month of sales. #uppliers will be pai! for in the ne+t month of purchase, an! other e+penses inclu!ing wages will be pai! for at the time when they are !ue. Kormal selling price will be $s.1& per unit. 'ach unit of 3nishe! pro!uct will nee! 0 units of materials A at a cost of $s.0, an! 6 units of material 8 at a cost of $s.%, other e+penses an! wages cost will be $s.% per unit. Company has a policy to eep minimum cash balance of $s.%&,&&& 3nishe! goo!s an! raw material in)entories to meet ne+t month:s sales an! pro!uction nee!s
AGyawali, Associate Professor Central Department of Management, TU. respecti)ely.
Required& a. Material purchase bu!get for 1st three months. b. Cash receipts an! !isbursement bu!get to ascertain ban borrowings if nee!e! for 1st three months. TU %&26>
'roblem ,%.
The past sales, forecaste! sales an! the manufacturing o)erhea! bu!get are
presente! below" Schedule I Past and forecasted sales Months
Falgun
Chaitra
Baishakh
Jestha
Ashadh
Shrawan
Bhadra
Sales in units
20,000
30,000
40,000
40,000
30,000
20,000
30,000
Schedule II Manufacturing overhead budget Months
Baisakh
Jestha
Ashad
0,000 20,000 !0,000 !0,000
"0,000 20,000 !0,000 !0,000
40,000 20,000 !0,000 !0,000
120,000
100,000
80,000
Indirect labour............................................. Heat, light and power.................................. Supervision................................................. Depreciation................................................
#elling price per unit will be $s.%& each. All sales are cre!it sales, an! cre!it sales will be realise! at *& in the month, 0& in the ne+t month5 an! the balance in the ne+t following month of sales. Purchases an! all other e+penses will be pai! in the month of purchases an! the e+penses. 'ach unit of 3nishe! pro!uct will nee! one unit of raw material at a cost of $s.6 an! two !irect labour hours 7 $s.%.2& per hour. The en!ing balance of raw materials an! the 3nishe! pro!uct will be e/ual units of raw materials an! 3nishe! pro!ucts necessary to meet the pro!uction an! sales nee! of the ne+t month respecti)ely an! the !esire! en!ing balance of cash $s.%&,&&&. The beginning balances of raw materials an! 3nishe! pro!ucts were 6&,&&& units each an! the cash balance of $s.%&,&&&. Required a) Pro!uction 8u!get b) Material Purchase 8u!get c) Cash Collection an! Disbursement 8u!get. TU %&2* >
'roblem ,(. The information nee!e! for the preparation of master bu!get has been pro)i!e! below" Schedule 1 alance sheet at the beginning o 20**
"iabilities
&ount s)
&ssets
&ount s)
AGyawali, Associate Professor Central Department of Management, TU. Share capital
!2*,000
etained earnings :oan
4*,000 20,000
ccounts paable
#*,000
-otal liabilities
2"*,000
9ash at ban8
!0,000
aw +aterial ccounts receivable
#*,000 "0,000
$achiner and plant
!20,000
-otal assets
2"*,000
Schedule 2 Sales budget or 4 +onths
/aisha3
#estha
&shad
Shra4an
300,000
400,000
*00,000
*00,000
udgeted sales value (s.)
Schedule 5 9ost o goods sold budget or three +onths
E.'enses
/aisa3h
#estha
&shad
Direct +aterials1 2*; o sales Direct wages1 30; o the sales
#*,000 0,000
!00,000 !20,000
!2*,000 !*0,000
'actor supervision ther actor e5penses
!0,000 4,000
!*,000 4,000
20,000 4,000
!,000
!,000
!,000
Depreciation
%& of sales of the month are cash sales an! balances are cre!it sales. *& cre!it sales are collecte! in the month of sales an! balance in the following month of sales. Purchases are pai! in the ne+t month of purchase an! all other e+penses are pai! in the month when they are !ue. Company maintaine! no in)entory of 3nishe! goo!s. Therefore, pro!uctions are e/ual to sales of the month. The in)entory of materials is maintaine! to meet the ne+t month:s pro!uction an! sales nee!. A minimum cash balance of $s.1&&&& to be maintaine!. 9nterest are payable together with amount of loan pai!. 4perating e+penses are %& of sales re)enue.
Required& a>
8u!gete! income statement
b>
Cash collection an! !isbursement bu!get
c>
8u!get balance sheet at the en! of %&22
Answers: a. Net income Rs.2,4,0000 b. Ending cash balance Rs.1,53,000 c. Balance sheet Rs.5,55,000
TU M8# Mo!el>
'roblem ,). A Company in its planning process prepare! )arious bu!gets an! also furnishe! the 8alance #heet of last year as follow" 6'ening /alance Sheet of 1 st /aisha3 Shareholders e
440,000 "0,000
Inventor o inished goods !0,000 units aw +aterials inventor 30,000 units ccount receivable
200,000
9ash ther i5ed assets
#00,000
Sales forecast for 1st three onths 7 for Shra4an
!00,000 !20,000 "0,000 20,000 400,000 #00,000
AGyawali, Associate Professor Central Department of Management, TU. Months Sales in unit Sales evenue
/aisha3
#estha
&shad
Shra4an
(otal
!0,000
!2,000
!2,000
!*,000
34,000
s. 200,000
s. 240,000
s.240,000
s.300,000
s."0,000
Production /udget Months nits /roduced
/aisha3
#estha
&shad
(otal
!2,000
!2,000
!*,000
3,000
&shad
(otal
Materials Purchase /udget Months nits /urchased /urchase /rice
/aisha3
#estha
30,000
3#,*00
30,000
#,*00
s.!20,000
s.!*0,000
s.!20,000
s.30,000
Hages an! other manufacturing e+penses are $s. * per unit, an! operating e+penses are 1& of gross sales 3gure. & percent of sales is in cash an! remaining %& percent on cre!it of 0& !ays. Cre!it sales are collecte! in the ne+t month of sales. 2& of the purchases are pai! in the month of purchase an! balance only in the ne+t month. Hages an! other e+penses are pai! for at the time when they are !ue. 'ach unit of 3nishe! pro!uct nee!s %.2 units of raw materials.
Required& a. #tatement of cost of goo!s sol! bu!get b. 8u!gete! income statement c. Cash collection an! !isbursement bu!get !. 8u!gete! balance sheet at the en! of Asha!. TU %&20>
'roblem ,*. Kepal 8atteries (t!. prepares its master bu!get on a /uarterly basis. The following !ata ha)e been assemble! to assist in preparation of the master bu!get for the secon! /uarter of 1 × i. As of March 01, 1 × the en! of the prior /uarter>, the company-s balance were as follows" 9ash
s.,000
ccount receivable Inventor /lant and e
4,000 !2,"00 200,000
ccount paable 9apital stoc8
s.!,300 !0,000
etained earnings s.2""00
ii.
Actual sales for March an! bu!gete! sales for April, ?uly are as follows" $arch
s."0,000
pril $a
#0,000 *,000
&une &ul
0,000 *0,000
#!,300 s.2","00
AGyawali, Associate Professor Central Department of Management, TU. iii. #ales are %& for cash an! & on cre!it. All cre!it sale term are net 0&. The accounts recei)able at March 01 are a result of March cre!it sales. i).
The company-s gross pro3t rate is 6& of sales.
).
Monthly e+penses are bu!gete! as follows" #alaries an! wages, $s.<,2&& per month5 BreightEout * of sales5 A!)ertising, $s.*,&&& per month5 Depreciation $s.%,&&& per month5 4ther e+penses 6 of sales.
)i. At the en! of each month, in)entory is to be on han! e/ual to 0& of the following month-s sales nee!s, state! at cost. )ii.Lalf a month-s in)entory purchases are pai! for in the month of purchase an! half in the following month. )iii.
'/uipment purchases !uring the /uarter will be as follows5
April, $s.11,2&& an! May, $s.,%2&. i+.
Di)i!en!s totaling $s.6,&&& will be !eclare! an! pai! in ?une.
+. The company must maintain a minimum cash balance of $s.,&&&. An open line of cre!it is a)ailable at a local branch of Kepal ban lt!. All borrowing is line at the beginning of a month, an! all payments are ma!e at the en! of a month. 8orrowings an! repayments of principal must be ma!e in multiple of rs.1&&&. (oan repayments are on a B9B4 basis, interest is pai! only at the time of repayment of principal. Lowe)er, any interest on unpai! loans shoul! be properly accrue! when statements are prepare!. The interest rate is 1% per annum. Bigure interest on whole month, e.g., 1;1% ,%;1%>
Required& 1. Cash bu!get an! 3nancial re/uirement. %. ProJecte! income statement for the /uarter en!ing ?une 0&. 0. ProJecte! balance sheet as of ?une 0&. TU %&2>
Problem 1. The Manufacturers (t!., in the process of preparing master bu!get has gathere! the following information" SCHE!"E I $onths Sales in unit Sales revenue
Past sales and sales forecasts %ov
Dec
&an
'eb
$ar
pr
$a
20,000
!*,000
20,000
30,000
3*,000
40,000
3*,000
400,000
300,000
400,000
"00,000
#00,000
00,000
#00,000
AGyawali, Associate Professor Central Department of Management, TU. SCHE!"E II
Manufacturing overhead cost budget
Months
#an
$eb
Mar
Indirect +aterials
30,000
3*,000
40,000
Indirect labour
"0,000
#0,000
0,000
Supervision
!*,000
!#,*00
20,000
epairs and +aintenance
!*,000
!#,*00
20,000
Depreciation -otal
*,000
*,000
*,000
!2*,000
!4*,000
!"*,000
2& of sales will be inc ash an! balance on cre!it. Cre!it sales will be collecte! as 2& in the month of cre!it sales, 0& in the ne+t month of sales an! balance in the ne+t following month of sales. Purchase will be pai! in the ne+t month of purchases an! all other e+penses will be pai! in the month when they are !ue. #elling an! other e+penses will be $e. 1 per unit of sales. 'ach unit of output will re/uire 1 unit of material an! % hours of !irect labour hours. Direct labour hour will cost $s.% per hour an! each unit of !irect labour hours. Direct labour hour will cost $s.% per hour an! each unit of material will cost $s.6. The raw material in)entory an! 3nishe! goo!s in)entory will be e/ual to ne+t month:s pro!uction nee! an! sales nee! respecti)ely. Company will eep minimum cash balance of $s.1&,&&& each month an! in Dec. last year the cash balance was $s.1&,&&& 3nishe! goo!s an! raw material in)entory at the en! of December were %&,&&& units each. Cre!itors payable for December purchases were of $s.&,&&&. The company will ha)e to retire !ebenture !ebts of $s.1&&,&&& in the month of ?anuary. #oft loan will be a)ailable at an interest rate of 1% per annum from the commercial bans. 8orrowing will be in a multiple of $s.1&,&&& an! repayment will be in $s.2,&&&. The interest will be pai! at the time of repayment on the amount of loan.
Required& 1. Material purchase bu!get for 1 st three months. %. 8u!gete! income statement at the en! of March. 0. Cash collection an! !isbursement bu!get for 1 st three months. Problem %&. The Kepal Tra!ing Louse (t!. ha)e collecte! the following information to prepare Master bu!get. /alance Sheet on #anuar%1, 200 s) >
etained earnings
!*0,000 20000
2"000
s) $erchandise inventor ccount receivable %ove+ber sales
!00000 !"000
Dece+ber "0000 9ash at ban8
#"000 20000
!"000
!"000
Merchandise sales budget /articulars?$onths
&an
Sales revenue s.
200000
'eb 300000
$ar
pr
3*0000
300000
AGyawali, Associate Professor Central Department of Management, TU. #ales woul! be %& in cash an! & on cre!it. Cre!it sales woul! realise 2& in the month of sales, 0& in the ne+t month5 1* in the following ne+t month of sales an! ba! !ebts woul! be 6. All e+penses inclu!ing purchases woul! be pai! in the same month of e+penses an! purchases. Gross pro3t margin woul! be 2& on sales an! a!ministrati)e an! !istribution e+penses woul! be 1& of gross sales. #u=cient merchan!ise in)entory woul! be maintaine! to meet ne+t month:s sales nee!. The company woul! !esire to ha)e minimum cash balance of $s.%&&&&. The 1& !ebenture woul! retire on ?anuary 1st, an! payable at a premium of 1&. A line of cre!it in a multiple of $s.1&&&& at an interest rate of 1% woul! be a)ailable to meet cash shortage an! repayment woul! be in $s.1&&& with the interest on principal repai!.
Required& a>
Merchan!ise purchase bu!get.
b>
Cash collection an! !isbursement bu!get
c>
8u!gete! balance! sheet at the en! of March. TU %&*&>
Problem %1. M;# (in (t!., is a tra!ing company which purchases an! sales merchan!ise manufacture! by other company. The company has a!opte! a bu!getary system in the planning system. The !ata relating to the last /uarter of the year ha)e been presente! below"
Sales and Sales Forecast Month
&ugust
Se'tebe r
6ctober
9ovebe r
eceber
#an 200
Sales in s.
400,000
*00,000
*00,000
"00,000
00,000
#00,000
All sales will be on cre!it. Cre!it will realie 2& in the month of sales 0& in the ne+t month of the sales an! remaining %& in the ne+t following month of sales. The gross pro3t margin on sales will be 6&. The purchase of merchan!ise an! all other relate! e+penses will be ma!e in the month of purchase an! the e+penses became !ue. The a!ministrati)e an! !istribution e+penses e+clu!ing the !epreciation on o=ce e/uipment of $s.2,&&& per month will be %& of the sales re)enue. Company will retire !ebenture !ebts of $s.%&&,&&& at a premium of 1& in the month of 4ctober an! buy a new computer for $s.2&,&&&. As a policy company will maintain $s.%2,&&& as cash balance an! merchan!ise in)entory necessary to meet ne+t months sales.
AGyawali, Associate Professor Central Department of Management, TU. A line of cre!it at an interest rate of 1% p.a. will be a)ailable from a commercial ban. The borrowing will be in a multiple of 2,&&& an! repayments in $s.1,&&& plus the interest on the amount of principal repai!.
Required a> Merchan!ise Purchase 8u!get for last /uarter. b> A!ministrati)e an! Distribution Cost 8u!get for the last /uarter c> Cash collection an! !istribution bu!get for last /uarter 'roblem 22.The information nee!e! for the preparation of master bu!get ha)e been pro)i!e! below. #che!ule" 9 8alance sheet at the beginning of %&22 (iabilities #hare capital $etaine! earning (oan Accounts payable Total
Amounts $s.1,%2,&&& 62,&&& %&,&&& <2,&&& %,*2,&&&
Assets Cash at ban $aw material Accounts recei)able Plant FMachinery Total
Amounts $s.1&,&&& <2,&&& *&,&&& 1,%&,&&& %,*2,&&&
#che!ule"% #ales 8u!get for 6 months
8u!gete! #ales )alue $s.>
8aisha 0,&&,&&&
?estha 6,&&,&&&
Asha!h 2,&&,&&&
#hrawn 2,&&,&&&
#che!uel"0 Cost Goo!s #ol! 8u!get for three months 8aisha $s.<2,&&& &,&&& 1&,&&& 6,&&& 1,&&&
?estha $s.1,&&,&&& 1,%&,&&& 12,&&& 6,&&& 1,&&&
Asha!h Direct material %2 of sales $s.1,%2,& Direct wages 0& of the sales && Bactory super)ision 1,2&,&&& 4ther factory e+penses %&,&&& Depreciation 6,&&& 1,&&& %& sales of the month are cash sales F balances are cre!it sales. *& cre!it sales are collecte! in the month of sales F balance in the following month of sales. Purchases are pai! in the ne+t month of purchase an! all other e+penses are pai! in the month when they are !ue. Company maintaine! no in)entory of materials is maintaine! to meet the ne+t month-s pro!uction F sales nee!. A minimum cash balance of $s.1&,&&& to be maintaine!. 9nterest are payable together with amount of loan pai!. 4perating e+penses are %& of sales re)enue. Required& a. 8u!gete! income statement b. Cash collection an! !isbursement bu!get. c. 8u!get balance sheet at the en! of %&22.
AGyawali, Associate Professor Central Department of Management, TU. Answers: a. Net income Rs.2,4,0000 b. Ending cash balance Rs.1,53,000 c. Balance sheet Rs.5,55,000 Problem 23.
athman!u Tra!ing Company in its process of preparing a master bu!get has gathere! the following information. 8eginning balance from the last year #che!ule" 9 Computing Machine $s.2&,&&& Merchan!ise in)entory $s.1,%&,&&& Account recei)able $s.1,2&,&&& 2& of Chaitra #ales> $s.%&,&&& Cash at ban $s.1,%&,&&& Account payable Chaitra purchase> #che!ule 999 Merchan!ise purchase bu!get
#che!ule 99" Borecaste! #ales 8aishah $s.%,&&,&&& ?estha $s.0,&&,&&& Asha! $s.0,&&,&&& #hrawan $s.%,&&,&&&
8aisha $s.1,&,&&& ?estha $s.1,&,&&& Asha! $s.1,%&,&&& The gross pro3t margin in sales will be 6& of merchan!ise sales. A!ministrati)e an! selling an! !istribution e+penses will be %& of sales re)enue of the month. #ales are all cre!it sales- merchan!ise purchase will be pai! in the following months of purchase. All other e+penses will be pai! in the month when they will be !ue. The company has inten!e! to purchase a!!itional unit of computing machine at a cost of $s.&,&&& in the month of 8aishah. The minimum cash balance re/uire! for the months un!er re)iew will be $s.%&,&&&. Merchan!ise in)entory at the en! of Asha! will be $s.1,%&,&&&. The company has an agreement with Kepal 8an (t!. for a temporary loan to meet cash !e3ciency of any months at an interest rate of 1% p.a. payable for the amount of loan repai!. The borrowing will be in a multiple of $s.2,&&& an! payment in a multiple of $s.1,&&&. $e/uire!" a. 8u!gete! income statement for three months en!ing Asha!. b. Cash collection an! !isbursement bu!get for three months. c. 8u!gete! balances sheet at en! of Asha!. Answers: a. Net income Rs.1,0,000 b. Ending balance o! "ash Rs1,00,000 c. Balance sheet Rs.5,00,000. #ints:$Ending in%entor& !or the month ' cost o! goods sold o! the ne(t month. Problem 24. The
balance sheet an! other operating bu!gets of a company has been summarie! below" 8alance sheet as at 01 st Dec.%&&6 $s.
$s.
AGyawali, Associate Professor Central Department of Management, TU. '/uity share capital Accounts payable $etaine! earnings
2,&&,&&& 0,&&,&&& 2&,&&&
Machinery F plant Merchan!ise in)entory Accounts recei)able" 2& December sales %,6&&&& %& Ko)ember #ales *6,&&& Cash at ban Total ,2&,&&& Total Past #ales an! Merchan!ise #ales 8u!get 9" ParticularsMont Ko). Dec. 6,&&,&& *,&&,&&& hs #ales $s.> Merchan!ise Purchase 8u!get 99"
?an. 2,&&,&&&
%,&&,&&& 0,&&,&&&
0,&6,&&& 6*,&&&
,2&,&&&
Beb. *,&&,&&&
March. ,&&,&&&
ParticularsMonth Dec. ?an. Beb. March. 0,&&,&&& 0,*&,&&& 6,&,&&& 0,*&,&&& s Merchan!ise purchase bu!get$s.> %& of the sales will be in cash an! & on cre!it. Cre!it sales will be realie! 2& in the month of sales, 0& in the ne+t month of sales an! 1 in the following ne+t month of sales5 an! ba! !ebts will amount to % of the cre!it sales. Purchases of merchan!ise will be pai! in the ne+t month of purchases. A!ministrati)e an! !istribution cost other than !epreciation of $s.0,2&& will be 0& of the gross sales )alue an! they will be payable in the month when !ue. The company will maintain a minimum cash balance of $s.0&,&&& an! merchan!ise in)entory su=cient to meet ne+t month-s sales. The company will buy a machine at a cost of $s.1,2&,&&& on ?an. 1 st %&&2, an! pay a !i)i!en! of $s.2&,&&& in the month of Beb. The company has entere! into agreement with the 9n)estment 8an for a soft loan to meet cash !e3ciency. The borrowing will be in a multiple of $s.1&,&&& an! repayment is $s.1,&&&. The ban will charge 1% per annum as interest on the amount of loan !ue. $e/uire!" a. Cash collection an! !isbursement bu!get for 1 st three month of the year. b. 9ncome statement for 1st three month. c. 8alance! sheet on 01 st March %&&2. )Answers: a. Ending balance o! cash Rs.30,000 b. Retained EarningRs. 1,02,200 c. Balance sheet Rs. 11,45,500* 1.
Problem 25. The summary 8alance #heet of a company as on 01st December last year was as un!er" (iabilities #hare capital $etaine! earning Accounts payable
$s. 6,&&,&&& *&,&&& %,<&,&&& <,0&,&&&
Assets Bi+e! assets 9n)entory Accounts recei)able Cash in han!
$s. 1,2&,&&& %,<&,&&& %,&,&&& 0&,&&& <,0&,&&&
AGyawali, Associate Professor Central Department of Management, TU. A!!itionally, you are informe!" Actual an! bu!gete! sales for !iNerent months are"
i.
Months
Ko)
Dec
?an
Beb
March
April
Actual sales $s.> 8u!gete! sales$s.>
2,&&,&&& E
2,&&,&& & E
E 6,2&,&&&
E 6,&&,&&&
E 2,&&,&&&
E 6,2&,&&&
ii.
iii.
i).
#ales are %& for cash an! & on cre!it. 2& of cre!it sales will be realie! in the month of sale, 0& in the ne+t month of sales an! the balance in the ne+t following month of sales. . Gross pro3t a)erage 6& of sales. 4perating e+penses an! selling e+penses will be 12 an! 2 of sales respecti)ely. All e+penses are pai! for at the time when they are !ue" Desire! en!ing balance of in)entory at the en! of each month will be su=cient in)entory to meet the following month sales. All purchases will be pai! in the ne+t month of purchase. Bi+e! assets costing $s. 1,2&,&&& will be ac/uire! on ?an %& th . The company has a policy of maintain minimum cash balance of $s.%2,&&&. The company arrange! a loan from ban at 1% per annum. Amount of interest !ue are pai! for the loan repai! with the repayment amount.
Required: a. Inventory purchase budget for 3 months ending March.!ns:2"#$"$$$" 3"$$"$$$ % 2"&$"$$$' b. (ash )udget for 3 months ending March.!ns:*"+5"3$$"' c. )alance ,heet at the end of March.!ns:-"--"3$$' ints:/0et income Rs.2"+-"3$$.
