Problem on Sales Budget

JK Ltd sells two products Jay and Kay in four areas

North, South, East and West. The following sales
are budgeted for the month of January 2010:

• North – Jay 5,000 units @ Rs. 30 each and Kay

3,000 units @ 15/- each
• South – Kay 6,000 Units @ 15/- each
• East – Jay 7,500 units @ 30/- each
• West – Jay 4,000 units @ 30/- each and Kay 2,500
units @ 15/- each.
Actual sales for the same period were as follows:
• North – Jay 5,750 units @ 30/- each and Kay 3,500
units @ 15/- each
• South - Kay 6,250 units @ 15/- each
• East – Jay 8,250 units @ 30/- each
• West – Jay 4,750 units @ 30/- each and Kay 2,625 units
@ 15/- each.
On the basis of all the relevant factors, the following sales
are budgeted for the month of February 2010.
North – Jay 6,000 units and Kay 3,250 units
South – Kay 6,500 units
East – Jay 8,500 units
West – Jay 4,500 units and Kay 2,750 units
It was decided that additional advertising
campaign will be undertaken in south and East
which will result in additional sales of 1,500
units of Jay in South and 2,500 units of Kay in
East.
You are required to prepare Feb. budget as well
as budget and actual for January.
 Problem from Cash Budget
• Prepare a cash budget for the three months ending
30 June 2010, from the information given below:
Month Sales Materials Wages Overheads

February 14,000 9,600 3,000 1,700

March 15,000 9,000 3,000 1,900

April 16,000 9,200 3,200 2,000

May 17,000 10,000 3,600 2,200

June 18,000 10,400 4,000 2,300

• Credit terms are:
Sales and debtors – 10% of sales on cash, 50% of
the credit sales are collected next month and
the balance in the following month:
Creditors – Materials 2 months
Wages ¼ months
overheads ½ month
• Cash and bank balance on 1 April 2010 is
expected to be 6,000/-
• Other relevant information are:
i. Plant and machinery will be installed in
February 2010 at a cost of Rs. 96,000
ii. Dividend @ 5% on preference share capital
of 2,00,000/- will be paid on 1st June
iii. Advance to be received for sale of vehicles
9,000/- in June.
iv. Dividends from investments amounting to
1,000/- are expected to be received in June.
v. Income tax (advance) to be paid in June is
2,000/-
 Problem on cash budget
Prepare a cash budget for the 3 months ended 30th September, 2006
with the following data
• Cash at bank on 1st July, 2006 25,000
• Monthly salaries and wages (estimated) 10,000
• Interest payable in August, 2006 5,000

Estimated Exp June Rs July August September

Cash sales (Actual) 1,20,000 1,40,000 1,52,000 1,21,000

Credit Sales 1,00,000 80,000 1,40,000 1,20,000
Purchases 1,60,000 1,70,000 2,40,000 1,80,000
Other exp 18,000 20,000 22,000 21,000

Credit Sales are collected 50% in the month of sale and 50% in the month
following. Collections from credit sales are subject to 10% discount if
received in the month of sale and to 5% if received in the month following.
10% of the purchases are in cash and balance is paid in next month.
1.Problem on Production Budget or Materials Purchase Budget

• P. Ltd manufactures two products using one type of material. shown

below is an extract from the company’s working papers for the next
period budget.
Budgeted sales (In units) Product A 3,600, Product B 4,800
Budgeted material consumption per product (Kgs) A 5kg, B 3Kg
Budgeted material cost Rs. 12 per kg, there are twelve 5-day weeks in the
budget period and it is anticipated that sales and production will occur
evenly throughout the whole period.
It is anticipated that stock at the beginning of the period will be: Product A
1,020 units, product B 2,400 units; raw material 4,300 kgs.
The target closing stocks, expressed in terms of anticipated activity during
the budget period are: Product A 15 days sales; product B 20 days
sales; raw materials 10 days consumption.
Prepare material purchase budget showing the quantities and values for
the next period.
 2.Problem on Production Budget or Materials Purchase
Budget
The following information has been made available from the records of
precision tools Ltd for the six months of 2009 (and the sales of
January 2010), in respect of product X:
1. The units to be sold in different months are:
July 1,100, August 1100, September1700, October 1900,
November 2500, December 2300, January 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 in
stock at the end of every month (including June 2009)
4. Budgeted production and production cost for the year ending 31
December 2009 are thus:
Production (Units) 22,000, Direct Materials per unit 10/-, Direct Wages
per unit 4/-, Total factory overheads apportioned to production
88,000/-.
Your required to prepare:
a. Production budget for the six months of 2009, and
b. Summarized production cost budget for the same period.
 3.Problem on Production Budget or Materials Purchase
Budget
• The following are the estimated sales of a company for eight
months ending 30-11-2010.

Month Estimated As a matter of policy, the company

Sales (Units maintains the closing balance of finished
goods and raw materials as follows:
April 12000
Finished goods: 50% of the estimated sales
May 13000 for the next month,
June 9000 Raw materials, estimated consumption for
July 8000 the next month.
Every unit of production requires 2 kg of
August 10000 raw materials costing 5/- per kg.
September 12000 Prepare production budget (in units) and
October 14000 raw material purchase budget (in units and
November 12000 cost) of the company for the half year
ending 30 September 2010.
4. Shangrila Food products Limited has prepared the following sales
budget for the first five months of 2010:
Month Sales Budget The inventory of finished products at the end
in units of every month is to be equal to 25% of the
Jan 10,800 sales estimate for the next month. On 1 Jan
Feb 15,600 2010, there were 2,700 units of product on
March 12,200
hand. There is no work-in-progress at the
end of any month.
April 10,400
Every unit of product requires two types of
May 9,800 materials in the following quantities:
Material A 4 kgs, Material B 5 kgs
Materials equal to one-half of the next month’s production are to be
in hand at the end of every month. This requirement was met on 1
Jan 2010. budgeted prices for the purchase of materials are: material
A – 3/-, Material B 2/- per kg. Prepare a materials budget for the first
quarter of 2010 in a logical form showing the quantities of each type
of material to be purchased every month. Also prepare a purchase
budget.
 Problem in Master Budget
• Glass manufacturing company requires you to present
the budget for the next year from the following
information:
Sales: Toughened glass 6,00,000/-, Bent glass 2,00,000/-
Direct material cost 60% of sales. Direct wages 20 workers
@ Rs. 150/- per month.
Factory Overheads: Indirect Labor – Works manager 500/-
per month, foreman 400/- per month.
Stores and spares 2.5% on sales,
Depreciation on machinery 12,600
Light and power 3,000/-, Repairs and maintenance 8,000/-
Other expenses 10% on direct wages
Administration, selling and distribution expenses 36,000/-
 Problem
• The expenses budgeted for production of 10,000 units in a
factory are furnished below:
Materials 70/- labor 25/- variable factory ohs 20/-
Fixed factory ohs (Rs. 1,00,000) 10/-
Variable expenses (direct) 5/-
selling exp (10% fixed) 13/-
distribution exp (20% fixed) 7/-
Admn exp (fixed factory ohs – 50,000) 5/-
Total cost of sales per unit 155/-
You are required to prepare a budget for the production of
6000 units and 8,000 units.
 Problem 2
• The budgeted cost of a factory specializing in the production of a
single product at the optimum capacity of 6,400 units per annum
amounts Rs. 1,76,000 as detailed below:
Fixed cost 20,688
Variable costs: Having regard to possible
power 1440 impact on sales turnover by
market trends the company
Repairs 1700
decide to have a flexible
Miscellaneous 540
budget with a production
Direct materials 49280 target of 3,200 and 4,800 units
Direct labor 1,02,400 . Prepare a flexible budget for
production levels at 50% and
Total 1,76,048 75% capacity., assuming sp
40/-, S & D exp 3,600/-
 Problem
• The expenses budgeted for production of 10,000 units in a
factory are furnished below:
Materials 70/- labor 25/- variable factory ohs 20/-
Fixed factory ohs (Rs. 1,00,000) 10/-
Variable expenses (direct) 5/-
selling exp (10% fixed) 13/-
distribution exp (20% fixed) 7/-
Admn exp (fixed factory ohs – 50,000) 5/-
Total cost of sales per unit 155/-
You are required to prepare a budget for the production of
6000 units and 8,000 units.