UNIT 3 BUDGET AND BUDGETARY CONTROLS SELF-ASSESSMENT EXERCISES

Student Name: Querubine Mae Taton Date Submitted: October 17, 2020
Course and Section: BS HM 3-B

PART 1. FILL IN THE BLANKS. Table 1 is the October Budget of Friendship Company.
Determine the Cost Ratio to Total Sales of each expenses it is expected to incur and
the desired profit it wanted to earn. Input your answer in the appropriate grey boxes in
the Table 1. If you are having hard time answer, you can refer to our Unit 3 Topic,
specifically in the Table 1.

Table 1. Monthly Budget of Friendship Company

Sales Distribution
Cost Ratio to Total
Sales Items Revenue (in Php)
Sales
Total Budgeted Sales 1,500,000 100%
Breakdown of Allowable Expense
Expenses Items Cost Ratio to Total
Expenses (in Php)
Sales
Cost of Sales (of food and
525,000 35%
beverages)
Payroll and Other Related Expenses 300,000 20%
Direct Operating Expenses (such as
105,000 7%
supplies, materials, etc.)
Rental 90,000 6%
Administrative expenses 75,000 5%
Utilities 75,000 5%
Repair & Maintenance 45,000 3%
Insurance 30,000 2%
Others 30,000 2%
Total Budget for Expenses 1,275,000 85%
Desired Profit 225,000 15%
Total 1,500,000 100%
PART 2. SOLVINGS

1. What is the break-even in sales if the Variable Cost % is 60% and the Fixed Cost is
P700,000?

¿Cost
BreakevenCost ∈ Sales=
Contribution Margin Percentage(CM %)

₱ 700,000
BreakevenCost ∈ Sales= =₱ 1,166,66 7
60 %

2. Continuing with the previous question, what is the total number of covers to achieve
the Break-even if the average check is P350?

¿ Cost
BEP Covers=
¿¿

₱ 700,000
BEP Covers=
[ ₱ 350−(0.60 x ₱ 350)]

₱ 700,000
BEP Covers=
[ ₱ 350−(210)]

₱ 700,000
BEP Covers= =5,000 covers
140

3. What is the target sales if you desire to achieve a profit of P200,000 and the
Variable Cost % is 50% and the Fixed Cost is P500,000?

¿ Cost + Desired Profit

Needed Volume of Sales=
Contribution Margin Percentage(CM %)

₱ 500,000+ ₱ 200,000
Needed Volume of Sales=
50 %
 ₱ 700,000
Needed Volume of Sales= =₱ 1,400,000
50 %

PART 3. ESSAY. Keep your answers as direct and brief as possible.

1. Give 3 reasons why is there a need to know if there are variances between the
Budget and the Actual Sales or Expenses?

 For the assigned personnel/staffs to compare and contrast the company’s

financial statements. They can differentiate those statements and see to it
what needs to be adjusted, needs to be increased and needs to be
balanced as written in the financial statement.

 It helps to identify the status of the company’s financial assets which will
serve as their basis in correcting the gap between the actual and budget
sales or expenses.

 The actual and budget sales or expenses helps to determine the decrease
and losses of the company which means it needs to be regularly
monitored for us to measure what are the possible reasons of having
deficits and losses in our profit, by the help of financial statements which is
recorded daily and monthly.