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Tutorial Topic 3 Budgeting and budgetary control
Financial and Management Accounting (ACC466)
Universiti Teknologi MARA
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Tutorial Topic 3: Budgeting and Budgetary Control QUESTION 1 (Test 1 May 2023) Syarikat GRM Sdn Bhd started a new business with an opening cash balance of RM20,000. The chairman of the company would like to see the expected cash inflow and outflow for the coming three months starting from the month of July to September 2023. The following data and estimates are available: (i) The total budgeted sales for the first three months will be RM 155,000, of which 20% is expected to be made in July. The remaining balance will be made equally in August and September. Out of the monthly sales, 30% will be made for cash, and these cash sales will be given a 10% discount. All credit sales will be collected one month after the sales are made. (ii) The expected material costs to be used during July, August, and September are RM10,800, RM20,000, and RM20,000, respectively. All purchases will be made on credit, and 40% of the credit purchases will be paid one month after the purchases, while the remaining balance will be settled two months after the purchases. (iv) Total conversion cost is to be RM12,000 per month (including RM3,000 for depreciation). The costs will be paid as it is incurred. (v) A consultation fee bill of RM15,000 is to be paid in September. (vi) New equipment amounting to RM120,000 is expected to be bought in July and to be paid in three equal instalments starting in August. (vii) Dividend income amounting to RM6,000 is to be received in September. (viii) The company expects to receive an additional amount of RM25,000 cash from the owners of the company in the month of September. Required: (a) Prepare a Cash Budget for July, August and September 2023. (16 marks) (b) Briefly explain two (2) limitations of preparing a budget. (4 marks) (Total: 20marks)
QUESTION 2 (Final Assessment July 2021) Roma Sdn Bhd is selling contemporary and home furniture that ideally represents the urban, modern and cosmopolitan lifestyle. One of their best seller products is Malvin Desk. The company purchases the products from outside manufacturer and sell the products after being custom-designed. The company provides the following information foy you to prepare the cash budget for Roma Sdn Bhd for the fourth quarter of 2021. September October November December Sales (RM) 20,000 28,000 34,000 30, Purchase (unit) 30 40 45 50 Overhead (RM) 15,000 12,000 18,000 20, Salaries and wages (RM) 22,000 22,500 24,000 25, Additional information: 1. All sales are on credit. 60% of the total sales are collected in the month of sales while the remaining will be collected one month after sales. 2. The purchasing cost per unit of Malvin Desk is RM600. All purchases are on credit and the payments are made two months after purchases. 3. Salaries and wages for the particular month will be paid one-month delay. 4. Overhead includes a monthly depreciation of a vehicle amounting to RM10,000. The overhead will be paid as it is incurred. 5. The company is expected to receive a commission amounting to RM5,000 in November and RM10,000 in December 6. Return on investment worth RM15,000 will be received equally in October and November. 7. Administrative is 5% of the monthly sales and paid every month. 8. The ending cash balance for the last month in the third quarter is RM14,500. Required: a. Prepare cash budget for the fourth quarter of 2021. (16 marks) b. Explain two (2) objectives of the cash budget. (4 marks)
QUESTION 4
TopSpot Sdn Bhd is a private corporation formed for the purpose of providing the products needed to irrigate farms, parks, commercial projects, and private homes. Below is the Manufacturing Overhead Costs Report which has been submitted by the company's new account assistant, Miss Sue: TopSpot Sdn Bhd Manufacturing Overhead Costs Report for the Month of April 2023 Overhead cost Budgeted Actual RM RM Indirect materials 5,875 5, Indirect labour 20,625 20, Utilities 11,750 11, Maintenance 8,225 8, Depreciation 16,800 16, Taxes & insurance 4,200 4, Other costs 1,500 2, Total costs 68,975 69, Production units 117,500 118, The following information relates to the Manufacturing Overhead Costs Report prepared above:
- Costs per unit of indirect materials and utilities are as follows: RM Indirect materials 0. Utilities 0.
- Indirect labour consists of RM3,000 salary paid to the production supervisor.
- Maintenance cost is a semi-variable cost, in which the variable portion varies with the unit produced. The budgeted fixed portion of maintenance costs is RM2,350 per month.
- Depreciation and taxes & insurance are fixed costs.
- Other costs are fixed at RM1,500. However, when productions exceed 118,000 units, there is a step cost of RM200 for every 250 units exceeding the number.
- Budgeted sales revenue for the month of April 2023 is RM129,250 and actual sales is amounting to RM142,200.
- Budgeted sales unit is equivalent to the budgeted production unit. The accounting and finance division of the company is headed by Mr Remy, who is also the Chief Financial Officer (CFO). He is concerned about the cost efficiency of the company. Thus he requested you present the relevant analysis during the management meeting.
Required: (a) Prepare a Performance Report to show the net profit to the chief financial officer (show clearly revenues, expenses, and variances) for the month of April 2023 using a flexible budgetary control system. (20 marks)
Tutorial Topic 3 Budgeting and budgetary control
Course: Financial and Management Accounting (ACC466)
University: Universiti Teknologi MARA
