# I the units to be sold for different months are as

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(i) The units to be sold for different months are as follows: Jul-89 1,100 August 1,100 September 1,700 October 1,900 November 2,500 Dec-89 2,300 Jan-90 2,200 (ii) There will be no work in progress at the end of any month. (iii) Finished units equal to half the sales for the next month will be in stock at the end of each month (including June 1989). (iv) Budgeted production and production cost for the year ending 31st December, 1989 are as follows: Production Units 22,000 Direct Materials Per Unit Rs. 10 Direct Wages Per Unit Rs. 4 Total Factory Overheads Apportioned to Product Rs. 88,000

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196 Answer: July Aug Sep Oct Nov Dec Opening Stock 550 550 850 950 1250 1150 Closing Stock 550 850 950 1250 1150 1100 Production 1100 1400 1800 2200 2400 2250 4. Following are the budget estimates of a repairs and maintenance department, which are to be used to construct a flexible budget for the ensuing year. Details of Cost Planned at 6,000 Direct Hours Planned at 9,000 Direct Hours All in Rs. Employees salaries 28,000 28,000 indirect Repair Material 42,000 63,000 Miscellaneous Cost 16,000 20,500 i. Prepare a flexible budget for the department up to activity level of 10,000 direct repair hours using increment of 1,000 hours. ii. What would be the budget allowance for 9,500 direct repair hours? Ans: Note 1: Indirect Repair Material is a Variable Overhead, so absorbed @ of Rs.7 per Direct Hours Note 2: Miscellaneous cost is a semi-variable cost, containing fixed cost and variable cost components. Fixed cost is Rs. 16,000. Balance amount Rs. 4,500 (20,500 16,000) is variable cost component, which works out to Rs. 1.50 per hour (4,500/3,000). Note 3: At 9,500 hours, for the incremental increase of 500 hours, the cost increases by Rs. 4,250 due to the following: Variable Cost Indirect Repair Material (@ Rs. 7 per hour) = 500 × 7 = 3,500 Semi-fixed cost miscellaneous cost (@ Rs. 1.50 per hour Variable cost component) = 500 × 1.50 = 750 Total incremental cost= 4,250 Direct Hours 6000 7000 8000 9000 9500 10000 Total cost 86000 94500 103000 111500 115750 120000 5. Prepare a Cash-Budget of a company for April, May and June 2015 in a columnar form using the following information:
197 (All in Rs.) Month, 2015 Sales Purchases Wages Expenses January (Actual) 80,000 45,000 20,000 5,000 February (Actual) 80,000 40,000 18,000 6,000 March (Actual) 75,000 42,000 22,000 6,000 April (Budgeted) 90,000 50,000 24,000 7,000 May (Budgeted) 85,000 45,000 20,000 8,000 June (Budgeted) 80,000 35,000 18,000 6,000 You are further informed that: a. 10% of the purchases and 20% of the sales are for cash; b. The average collection period of the company ½ month and the credit purchases are paid off regularly after one month; c. Wages are paid half monthly, and the rent of Rs. 500 included in expenses is paid monthly; d. Cash and Bank Balance as on April, was Rs. 15,000 and the company wants to keep it at the end of every month approximately this figure, the excess cash being put in fixed deposits in the bank. 6. From the following forecast of income and expenditure, prepare a cash budget for the months January to April 2016. (All in Rs.) Months Sales (Credit) Purchases (Credit) Wages Manufacturing Expenses Administrative Expenses Selling Expenses 2015, Nov 30,000 15,000 3,000 1,150 1,060 500 2015, Dec 35,000 20,000 3,200 1,225 1,040 550 2016, Jan 25,000 15,000 2,500 990 1,100 600 Feb 30,000 20,000 3,000 1,050 1,150 620 March 35,000 22,500 2,400 1,100 1,220 570 April 40,000 25,000 2,600 1,200 1,180 710 Additional information is as follows: 1. The customers are allowed a credit period of 2 months.

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• Spring '12
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