Cost Accounting Questions
From the following statements, prepare a month-by-month cash budget for the six months to 31 December.
- Revenue budget (i.e. trading profit and loss account).
Six months to 31 Dec (all revenue/costs accrue evenly over the six months.
|Shs ‘000’||Shs ‘000’|
|Sales (Cash received/month in arrears)||1,200|
|Cost of sales:|
|Paid one month in arrears||900|
|Paid in one month of purchase||144|
|(b) Capital Budget||Shs ‘000’|
|Payments for new plant|
|Increase in stocks payable in August||20|
|Receipts – New issue of Share Capital (October )||30|
|Shs ‘000’||Shs ‘000’|
|(c) Balance sheet||Actual/July Shs ‘000’|
|Assets Fixed Assets||720|
|Capital and reserve||856|
|Taxation (payable December)||30|
|Creditors – Trade||160|
|Dividends (Payable August)||24|
S. Ltd Manufactures three products A. C and E in two production departments F and 6 each of which employs to grades of labour. The following data are available
|Total||A (Units)||C (Units)||E (Units)|
|Budgeted stocks are as follows.|
|1 January, Year 2||720||540||1800|
|31 December, Year 2||600||570||1000|
|All stocks are valued at expected cost @ unit||Shs24||Shs15||Shs20|
|Calculated as % of S.P||20%||25%||16%|
|Shs ‘000”||Shs ‘000”||Shs ‘000”||Shs ‘000”|
|Budgeted sales South||6600||1200||1800||3600|
|Normal loss in production||10%||20%||5%|
Expected labour times per unit and expected rates/hr.
|Department F Grade 1||1.80||1.0||1.50||0.50|
|Department 6 Grade 1||2.0||1.50||0.50||0.50|
Prepare the production budget is units for products A, C and E.
Prepare the direct wages budget wages budget for department F and with the labour costs of products A, C and E and totals shown separately.
- Give sound reasons why it is necessary for a business concern to prepare budgets.
- A whole selling company had the following data for the month of November 1997.
|Stocks||1 November 1997||1300 units|
|Cash balance||1 November 1997||700,000|
|Expected credit sales||4,860,000|
|Expected cash receipts||1,960,000|
|Minimum cash balance||30 Nov 1997||Sh. 100,000|
|Stocks balance||30 Nov 1997||1700 units|
|Expected sales||10,000 units|
|Expected collection from customers||Sh. 47,000,000|
|Expected cash disbursement||Sh. 1,740,000|
- Budgeted purchases
- Budgeted debtors
- Cash budgets
Stop over industries ltd, a recently incorporated company plans to go into production next year. The following standard cost matrix has been assembled for one of the products it proposes to manufacture.
|Cost per unit|
|Variable factory overhead||8.00|
|Total standard cost||50.0|
The following recent information is available.
- The company anticipates to manufacture and sell 198,00 units in the 2000 financial year.
- Sales in the second and fourth quarters of the year are expected to be twice those of the first and third quarters.
- Direct materials are ordered and paid for a month in advance.
- 20% of the company sales are in cash. 60% of the credit sales are collected in the month following the month of sale and the balance the following month.
- Expenses are settled in arrears at month end.
- Overdraft facilities have been agreed at 30% p.q and the company’s bank balance at 31 December 19x9 is expected to be Sh. 50,000.
- The product is expected to retail at Sh. 80@ unit.
- Budgeted profit and loss for the first quarter.
- Sales collection and schedule for the months of January, February and March 2000.
- Cash flow for the months of January, February and March 1999.
Budgets are plans expressed in financial and/or quantitative terms for a specified period of time in the future in setting up a budgetary control system.
- Describe what is the principal budget factor.
- Essentials of effective budgetary control system