BUDGETARY CONTROL

Q.1 The following information has been made available from the records of
Precision Tools ltd for the six months of 2019 (and the sales of January 2020) in
respect of product X.
1. The units to be sold in different months are:
July 2019 1100
Aug 2019 1100
Sept 2019 1700
Oct 2019 1900
Nov 2019 2500
Dec 2019 2300
Jan 2020. 2000
2. There will be no work in progress at the end of any month.
3. Finished units equal to half the sales of the next month will be the stock at the
end of every month (including June 2019)
4. Budgeted production and production cost for the year ending 31 st of Dec.
2019 are:
Production (units). 22,000
Direct Material per unit Rs.10
Direct Wages per unit Rs. 4
Total Factory overhead apportioned to production Rs.88,000.
You are required to prepare
a. Production Budget for the six months of 2019 and
b. Summarised Production Cost budget for the same period.

Q.2 The Sales Manager of Mahindra and Company ltd reports that next year he
expects to sell 50,000 units of a certain product. The production manager
consults the storekeeper and casts his figure as follows: Two kinds of raw
materials A and B are required for manufacturing the product. Each unit of
the product requires 2 Kgs of A & 3 Kgs of B. The estimated opening balance
at the commencement of the next year are Finished product is 10,000 units, A
 ,12000kg, B 15000kgs.The desired closing balances at the end of the next year
are:Finished product 14,000 units , A 13000 Kgs B 16000kgs. be 16,000.
Draw up a Material Purchases budget for the next year

Q3 A company is expecting to have 25000 cash in hand on 1.4.2013 and it

requires you to prepare Cash Budget for the three months April To June 2013. The
following information is supplied to you
MONTHS SALES PURCHASE WAGES EXPENSES
FEB 70000 40000 8000 6000
MARCH 80000 50000 8000 7000
APRIL 92000 52000 9000 7000
MAY 100000 60000 10000 8000
JUNE 120000 50000 12000 9000

Other Information:
1. Period of credit allowed by the supplier is two months.
2. 25% of the sale is for cash & the period of credit allowed to customers for
credit sales is one month.
3. Delay in payment of wages and expenses 1 month.
4. Income tax is 25,000 is to be paid in June 2013.

Q 4. Draw up flexible budget for overhead expenses on the basis of following data
& determine overhead rate at 70%,80% & 90% plant capacity.
PARTICULARS At 80% capacity
VARIABLE OVERHEADS
Indirect Labour 12000
Stores including spares 4000
SEMI VARIABLE OVERHEADS
Power (30% Fixed,70% Variable) 20000
Repairs & Maintenance (60% Fixed,40% Variable) 2000
FIXED OVERHEADS
Depreciation 11000
Insurance 3000

2
 Salaries 10000
TOTAL OVERHEADS 62000

Estimated Direct labour Hours 124000 hours

Q.5 The following data relate to Bookhive Ltd.

The financial Manager has made the ollowing sales forecasts fot the first five
months of the coming year commencing from 1st April 2013
MONTHS SALES(RS.)
APRIL 40000
MAY 45000
JUNE 55000
JULY 60000
AUGUST 50000

Other Data:
1. Debtor’s & Creditor’s balance at the beginning of the year are Rs.30,000
Rs.14,000 respectively. The balance of the other relevant assets and
liabilities are cash balance Rs.7500,Stock Rs. 51,000, Accrued sales
commission Rs.3500.
2. 40% sales are on the cash basis, credit sales are collected in the month
following the sale.
3. Cost of Sale is 60% on sales.
4. The only other variable cost is a 5% commission to sales agents. The sales
commission is paid in a month after it is earned.
5. Inventory (stock) is kept equal to sales requirement for the next two
months budgeted sales.
6. Trade Creditors are paid in the following month after purchases.
7. Fixed cost are Rs. 5000 per month including 2000 depreciation.
You are required to prepare a Cash Budget for the month of April, May and June
2013 respectively