Thiagarajar School of Management, Madurai

Budget Preparation
Whitey Teeth is into the business of tooth paste and their brands are
1) Vajra Daant – For Aged people
2) Giranee – For Kids
3) Tej – For Young people
Region wise last year sales was as follows (Units in 100):
Northern Southern Eastern
Vajra Daant 4,000 1,000 3,000
Giranee 2,000 500 5,000
Tej 8,000 600 6,000
Based on above details of sale in units, the following plan for next year is made
A) Prices are fixed as follows. Prices are fixed lower in southern area to capture the market
Price in `Per Unit Northern Southern Eastern
Vajra Daant 40 20 30
Giranee 55 30 50
Tej 65 40 60
B) Due to reduced sale price in Southern region and higher price at Northern region the
expected sale for next year will be
Northern Southern Eastern
Vajra Daant 10% Increase 30% Increase 5% Increase
Giranee 20% Increase 20% Increase 10% Increase
Tej 15% Increase 20% Increase 5% Increase
C) Expecting above sales, the month wise sales expected for the first quarter of next year is
Units Northern Southern Eastern
in 100 Vajra Vajra Vajra
Giranee Tej Giranee Tej Giranee Tej
Daant Daant Daant
April 300 180 700 100 30 40 250 500 600
May 350 200 750 100 35 45 275 600 650
Jun6 400 220 750 105 35 50 300 700 700
Jul 420 240 800 110 40 45 325 600 700
Aug 450 250 850 120 45 45 350 700 750
Sep 450 260 850 130 50 50 375 800 800
D) It is the policy of the company to keep ready the stock of paste in the market before the
start of the month.
E) Main raw material of the paste Sodium Bicarbonate is purchased from a single supplier
by paying advance which takes one month to deliver and Calcium Carbonate is
purchased from a local supplier with 1 month credit.
F) Last year price of Sodium Bicarbonate required for 100 units of any paste is `220 and
Calcium Carbonate for 100 units of any paste is `180. It is expected that price of Sodium
Bicarbonate will increase by 10% during first Quarter whereas Calcium carbonate will be
available at the same price.
Prepare the required budgets for the first quarter of next year

MBA MCA 2021-23 – Questions for Class Discussion Page 2

 Thiagarajar School of Management, Madurai
Collection pattern is as follows:
1) Northern Region with 1 month credit
2) Southern Region 50% in advance and 50% in the same month
3) Eastern Region 50% in the same month and 50% in the subsequent month

Payment for other material is 50% in the same month and 50% in the subsequent month. Value
of other raw material is `800 per 100 units and other material is `200 per 100 units.
Wages paid to workers twice in a month which is `400 per 100 units and other variable expenses
which is paid by subsequent month is `200 per 100 units

Fixed cost allocated is `1,000 per 100 units of all paste.

Special material required for Tej requires `200 per 100 units and for Giranee it will be `300 per
100 units. Special materials are purchased in advance for a quarter in advance

Prepare the Cash Budget by considering `40,00,000 opening balance of cash and at any point
of time company wants to keep `30 lakhs as minimum cash balance

MBA MCA 2021-23 – Questions for Class Discussion Page 3