Which one of the following statements is correct? An incremental budget is one that:

Which one of the following statements is correct

Budgetary slack occurs where managers:

Which one of the following statements is correct?

A rolling budget is one that:

Identify the missing word in the following sentence from the list given.

The starting point for most budgets is the _______ budget.

The directors of Charleroi and Biswas are preparing a production budget for December 2010. The sales budget for December 2010 is 6000 units, dropping to 4500 for January 2011. The company’s policy is to hold closing inventories of finished goods at 50% of the next following month’s sales level.

What is the production budget in units for December 2010?

Senior managers of Blucher Demosthene are preparing a production budget for the month of August 2010. The sales budget for the month is 8500 units. Sales for September 2010 are budgeted at 8760 units. The company’s policy is to hold closing inventory of finished goods at 75% of the next following month’s sales levels.

What is the production budget in units for August 2010?

Genever and Bruton is preparing a production budget for the 3-month period covering March, April and May 2010. Sales budgets are as follows:

January 2010	5000
February 2010	5560
March 2010	5750
April 2010	5570
May 2010	4900
June 2010	5000

The company has a policy of holding closing inventory of finished goods at 60% of the next following month’s sales levels.

What is the total production budget in units for the 3-month period?

Metz and Bentley is currently preparing its production budget for the month of March 2010. The company has a policy of holding closing inventory equivalent to the whole of the next month’s sales in units, plus 50% of the next following month’s sales in units.

The sales budget includes the following figures:

February 2010	7820
March 2010	7860
April 2010	7900
May 2010	7740

What is the production budget in units for March 2010?

Bowler and Perkiss manufactures a product, the XPZ 100, that requires 6 kg of metal per unit.

The production budget for the XPZ 100 is 320 units in February 2010 and 300 units in March 2010.

The directors have decided to adopt a policy of reducing inventory holdings where possible. From February 2010 onwards they intend to hold in inventory, at the beginning of the month, exactly 40% of the raw material required for the current month’s production.

The amount of metal in inventory at the beginning of February was 1510 kg.

What quantity of metal must be purchased during February in order to comply with the directors’ new policy?

. Hamburg and Schlossfelder manufactures a product that requires 3.5 metres of metal edging per unit. The production budgets in units for May and June 2010 are as follow:

May 2010	610
June 2010	660

The inventory holding policy is to have available at the beginning of each month 50% of the raw material required for the current month’s production.

How much of the metal edging must be purchased during May in order to comply with this policy?

Berry Fitzsimmons uses a standard metal component in its production of lampstands (one component per lampstand). The components can be supplied at very short notice, so only 20% of the components required for the current month’s production are kept in inventory. The opening inventory of components at the beginning of March 2010 was 120, rising to 130 by the end of the month.

Assuming that the inventory holding policy has been strictly applied, what was the increase in the production budget for lampstands between March 2010 and April 2010?

Snaith and Tewkesbury manufactures pencil tins. The directors have decided that the production budget for June 2010 will be 16 500 tins, and 17 100 tins in the following month.

Each tin uses 0.3kg of metal which is bought in at a cost of €6.80 per kilo. The inventory holding policy of the company is to hold 40% of the raw material inventory required for production in the month as opening inventory.

What will be the cost of purchases of the metal in June 2010?

Skapinker and Giles manufactures photocopier casing units. The prime cost of each casing is €26.50. For the year ended 31 March 2010, the directors estimate that production overheads will be €6 761 000 and selling and administration overheads will be €3 626 000. Estimated production and sales for the financial year is 275 000 units.

The company uses percentage of prime cost as its overhead recovery rate.

What is the budget production overhead recovery rate, expressed as a percentage, for the year ended 31 March 2010 (to one decimal place)?

Slocombe and Quarmby ’s overhead budget for the 2010 financial year shows a total of €3 360 000, of which 30% is classified as selling and administration overhead, with the remainder being production overhead.

Estimated production and sales for the year is 600 000 units. Each unit requires 1.5 machine hours. Production overhead is recovered per machine hour.

What is the budgeted production overhead recovery rate for 2010 (to the nearest ¢)?

Speel & Pooley’s overhead budget for the 2011 financial year includes the following totals for fixed overheads:

	€
Factory premises costs	1 330 400
Production supervision	227 000
Other production overheads	555 700
Selling overheads	363 200
Administration and office overheads	426 400
TOTAL	2 902 700

Estimated production and sales for the year is 750 000 units. Each unit requires 1.3 machine hours. Production overhead is recovered per machine hour.

What is the budgeted production overhead recovery rate for 2011 (to the nearest ¢)?

Brinscall Kielder produces garden leaf blowers. The prime cost of each leaf blower is €26.50. For the year ended 31 March 2010, the directors estimate that production overhead will be €6 761 000 and selling and administration overhead will be €3 626 000. Estimated production and sales for the financial year is 275 000 units, and the budget selling price is €76.50.

What is the budget profit of the company for the year ended 31 March 2010?

Formosa Dangerfield budgets sales of 600 000 units for the 2010 financial year. Budget selling price per unit is €7.50 and prime cost is expected to be €3.25 per unit, comprising €1.30 in direct materials and €1.95 in direct labour. Production overhead is to be recovered at 133% of direct labour. Selling and administrative overhead is budgeted at €623 400.

What is the company’s budget profit for the financial year?

Finch and Villefranche budgets sales of 136 000 units for its 2010 financial year. The budget selling price per unit is €9.75. Prime cost is budgeted at €3.45 per unit. Production overhead is to be recovered at €4.81 per machine hour. Each unit produced is budgeted to use 0.75 machine hours. The selling and administration overhead is estimated at €143 000.

What is the company’s budget profit for the 2010 financial year?

Omar sells goods entirely on credit. In respect of sales in any given month, he expects 50% to be paid for in the next following month, 40% in the month after that and the final 10% in the month after that. (So, for example, 50% of sales made on credit in January would be received in February, 50% in March and 10% in April).

Budget data relating to 5 months’ worth of Omar’s sales are as follow:

February	€18 850
March	€21 440
April	€16 220
May	€15 570
June	€18 250

Omar is currently preparing his cash flow forecast for June. How much should he include as forecast sales receipts for that month?

Asha sells goods entirely on credit. In respect of sales in any given month she expects 40% to be paid for in the next following month, 40% in the month after that, 15% in the month after that and the remainder in the month after that.

Budget data relating to 6 months of Asha’s sales are as follow:

January	€12 220
February	€13 600
March	€13 900
April	€13 260
May	€14 400
June	€15 660

Asha is currently preparing her cash flow forecast for June. How much should be included as forecast credit sales receipts for that month?

Baldric makes 60% of his sales on credit with the remainder made for cash. In respect of credit sales in any given month he expects to receive 50% in the next month following, 30% in the month after that and 20% in the month after that.

Budget data relating to Baldric’s sales for the early part of the 2010 financial year are as follow:

January	€20 600
February	€21 300
March	€22 500
April	€20 400
May	€23 200

Baldric is currently preparing his cash flow forecast for May. How much should he include as forecast credit sales receipts for that month?

Candida makes 70% of her sales on credit with the remainder made for cash. In respect of credit sales in any given month she expects to receive 60% in the next month following, 30% in the month after that and 10% in the month after that.

Candida has budgeted sales of €15 000 in January 2010. She expects sales to rise by 1% each month during the rest of 2010.

She is preparing her cash budget for April 2010. How much should she include as forecast credit sales receipts for that month (to the nearest €)?

Sawbridge Farnsworth purchases all its goods on credit. 70% are paid for in the month following purchase, with the remaining 30% paid in the next following month. (So, for example, 70% of January purchases will be paid for in February, and 30% of January purchases will be paid for in March).

Purchases of goods are budgeted as follows for the second quarter of 2010:

April	€16 600
May	€17 200
June	€18 500

How much cash outlay will be budgeted in respect of credit purchases for the month of June 2010?

Jeannie Products purchases all its goods on credit. On average, 70% are paid for in the month following purchase, 20% in the month after that and 10% in the month after that.

Purchases of goods are budgeted as follows for the second half of 2010:

July	€2680
August	€3750
September	€4000
October	€4250
November	€5500
December	€3350

How much cash outlay will be budgeted in respect of credit purchases for the month of November 2010?

Robertson & Jellicoe purchases 90% of its goods on credit, paying cash for the remainder. On average, the company expects to pay for 90% of its credit purchases in the month immediately following purchase, with the remaining 10% paid for in the month after that.

The company’s purchases budget for the third quarter of the 2010 financial year is as follows:

July	€137 400
August	€155 200
September	€144 600

How much cash outlay will be budgeted in respect of purchases, both credit and cash, in September 2010?

Snoeke Downfall purchases 85% of its goods on credit, paying cash for the remainder. On average, the company expects to pay for 80% of its credit purchases in the month immediately following purchase, with the remaining 20% paid for in the month after that.

The company’s purchases budget for the final quarter of 2010 is as follows:

October	€66 200
November	€61 000
December	€56 600

How much cash outlay will be budgeted in respect of purchases, both credit and cash, in December 2010?

Frances is a travel agent. Her budget for 2010 assumed that she would sell 1450 holidays at an average price of €1500, earning 10% commission on each holiday sold. Comparing actual with budget figures after the year end, Frances finds that she sold only 1375 holidays, but at an average price of €1521. In order to negotiate some special deals she had to take lower commission in some cases. Her average commission for the year was 9.7%.

What was the difference between Frances’ budget and actual commission revenue for the 2010 financial year (to the nearest €)?

Actual commission revenue was:

Piero makes his living from organising boat trips across a lake with scenic views. He charges €6.50 per trip, and he budgets to sell 11 650 trips during his 2010 season, which runs from May to September.

During May 2010 Piero found that business was slow. Therefore he took the decision to lower the fare per trip from €6.50 to €6.00 with effect from the beginning of June, in an effort to increase business.

Actual figures for number of trips sold in 2010 were as follow:

May 2010	620
June 2010	1850
July 2010	3650
August 2010	5000
September 2010	1940
TOTAL	13 060

Piero’s budget expenses for the 2010 season were as follow:

Staff costs	€12 560
Boat maintenance	€6 220
Depreciation	€16 000
Admin. expenses	€8950
TOTAL	€43 730

Actual staff costs exceeded budget by 5%. Boat maintenance charges were actually €7550 and administrative expenses were €9590. Depreciation was charged in line with budget.

By how much did Piero’s actual profit exceed budget profit in the 2010 season?

Britt is a financial services adviser. Her budget for the financial year ended 31 December 2010 estimated sales of 150 insurance policies and pension plans at an average commission of €430. Following a review of commissions by one of the major financial services companies, her actual average commission per deal fell to €395. She actually sold 143 policies and plans in the year.

Travel expenses were budgeted at €5500 and general administrative expenses at €4820. Britt spent slightly less than budget on travel expenses, saving 6% of the budget amount. Administrative expenses, however, exceeded budget by 4%. By how much did Britt’s actual net profit for the year fall short of budget net profit (to the nearest €)?

Sisley Wollenstein made an actual net profit of €31 400 in the financial year ended 31 March 2010. Revenue was €39 000 higher than budget, and actual net profit margin was 5.7% compared to budget net profit margin of 4.9%. Budget gross profit margin was 33.5%.

What was the company’s budget cost of sales for the year (to the nearest €)?