Requirements for efficient operations of budgetary control system.
i) Planning: This ensures that managers can come up with the direction in which an
organization should take, to anticipate problems and respond correctly to any problems
arising.
ii) Coordination: Coordinating the activities of the various departments so as to achieve the
overall objectives of the firm.
iii) Communication: This serves to inform the various departments on what needs to be done, by
whom and how.
iv) Motivation: This stimulates the performance levels of employees and management.
v) Control: This assists management by exception (MBE) i.e. where control measures are
applied when there is a significant deviation from expected results.
vi) Performance evaluation: An employee's performance can be evaluated and assessed based on
budgeted results.
marto answered the question on February 25, 2019 at 09:23
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Kimani and Otieno who are in partnership, wish to prepare a budget for material requirements.
They have requested for your assistance and presented the following information:
1....
(Solved)
Kimani and Otieno who are in partnership, wish to prepare a budget for material requirements.
They have requested for your assistance and presented the following information:
1. Sales budget for the five months from June 2011 to October 2011 is as follows
2. Finished goods at the end of the month are to be maintained at 25% of sales estimate for the
following month
3. 2,700 units of finished goods were available at the beginning of june 201
4. There is no closing work in progress (WIP) in any month
5. Each unit requires 5 kilograms of material 'Q and 4 kilograms of material 'P
6. Materials at the end of every month are to be maintained at half of the requirements for the
following month
Required:
i) Production budget for the month of June, August and September 2011
ii) Material 'P' usage budget for the month of June, July and August 2011
iii) Material 'Q' usage budget for the month of June and August 2011
Date posted:
February 25, 2019
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Answers (1)
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Describe the following terminologies in relation to preparations of a budget
i) Budget period
ii) Budget committee
iii) Budget manual
(Solved)
Describe the following terminologies in relation to preparations of a budget
i) Budget period
ii) Budget committee
iii) Budget manual
Date posted:
February 25, 2019
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Answers (1)
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Bright Retailers Ltd. operates a budgetary control system. The following is the company's profit
forecast for the six months period ending 31 March 2012:
(Solved)
Bright Retailers Ltd. operates a budgetary control system. The following is the company's profit
forecast for the six months period ending 31 March 2012:
Additional information:
1. 25%, of the sales are on cash basis. The balance is receivable three months after the month of
sale.
2. A generator worth Sh.600,000 was procured in September 2011. The supplier would install and
test the generator for three months whereas the payment will be made in January 2012.
3. Payment for raw materials is made to suppliers two months after delivery.
4. A dividend of Sh.900,000 will be paid in December 2011.
5. Rent for three months is payable in advance on the first day of each quarter.
6. Advertising expenses are paid three months in arrears.
7. 75% of the wages are paid in the month they are incurred with the balance being paid in the
following month.
8. The company's cost accountant estimates the closing cash balance for the quarter ending
December 2011 to be Sh.1 million.
Required:
A cash budget for the quarter ending 31 March 2012
Date posted:
February 25, 2019
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Answers (1)
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Explain five factors to consider when preparing a sales forecast for a cash budget.
(Solved)
Explain five factors to consider when preparing a sales forecast for a cash budget.
Date posted:
February 22, 2019
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Answers (1)
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Distinguish between the following sets of terms:
ii) Fixed budget and flexible budget.
(Solved)
Distinguish between the following sets of terms:
ii) Fixed budget and flexible budget.
Date posted:
February 22, 2019
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Answers (1)
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Kilim Ltd manufactures and sells a single product. The financial year of the company ends on 31
December every year. The following data have been collected...
(Solved)
Kilim Ltd manufactures and sells a single product. The financial year of the company ends on 31
December every year. The following data have been collected for use in preparing the company's
quarterly budgets for the financial year ending 31 December 2013.
4. At the end of each quarter, closing stocks of finished goods are expected to be 10% of the
next quarter's sales requirement.
5. The closing stock of raw materials is expected to be higher than the opening stock by 10%.
6. Sales for the quarter ending 31 March 2011 A ate expected to be 36,000 units.
7. As from 1 July 2013, the selling price per unit is expected to increase by 10% from the
current price of Sh 600.
Required;-
i) Sales budget in value for each quarter.
ii) Production budget for each quarter.
iii) Material usage budget in units for each quarter
iv) Materials purchase budget for the year in units and value.
Date posted:
February 22, 2019
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Answers (1)
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Outline three differences between budgets and standards.
(Solved)
Outline three differences between budgets and standards.
Date posted:
February 22, 2019
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Answers (1)
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Kazuri Furniture manufactures a single product branded 'sofa'. The following were the budgeted
costs at different levels of output for the year ended 31 December 2013:
(Solved)
Kazuri Furniture manufactures a single product branded 'sofa'. The following were the budgeted
costs at different levels of output for the year ended 31 December 2013:
Date posted:
February 22, 2019
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Answers (1)
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Differentiate between the following types of budgets
i) Functional budget and master budget.
ii) Rolling budget and incremental budget.
(Solved)
Differentiate between the following types of budgets
i) Functional budget and master budget.
ii) Rolling budget and incremental budget.
Date posted:
February 22, 2019
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Answers (1)
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XYZ Ltd. Carries on its business in Nairobi. The company has been reporting its profits using
absorption costing system. During the financial year ended 30 September...
(Solved)
XYZ Ltd. Carries on its business in Nairobi. The company has been reporting its profits using
absorption costing system. During the financial year ended 30 September 2005, the following
summary statement was provided:
Date posted:
February 22, 2019
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Answers (1)
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Jogi Transporters operate in the transport industry. On 1 December 2005, the management
acquired a new lorry to meet customer needs and cater for the increase...
(Solved)
Jogi Transporters operate in the transport industry. On 1 December 2005, the management
acquired a new lorry to meet customer needs and cater for the increase in business volume.
The following information relates to the initial and maintenance cost of the lorry.
Additional information:
1. The lorry has an economic life of 4 years.
2. The lorry has 6 tyres after each costing Sh.8000
3. Service is carried out after every 5,000 kilometres.
4. On average the lorry covers 20 kilometres per litre of fuel consumed.
5. The lorry is projected to cover 100,000 kilometres in January 2006, 25,000 kilometres in
Required:
Prepare a schedule for the three months showing
i. Variable costs per kilometer
ii. Fixed costs per kilometer
iii. Total costs per kilometer
c) Fixed costs are actually variable cost
With reference to (b) above explain whether you agree or disagree with the statement.
February 2006 and 50,000 kilometres in March 2006.
Date posted:
February 22, 2019
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Answers (1)
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Briefly explain the following terms as used in cost accounting:
i. Mixed costs
ii. Cost behaviour
iii. Incremental cost
(Solved)
Briefly explain the following terms as used in cost accounting:
i. Mixed costs
ii. Cost behaviour
iii. Incremental cost
Date posted:
February 22, 2019
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Answers (1)
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Happy Holidays Resort operates a leisure complex in Watamu Town. The company offers a
variety of facilities among which are sporting, accommodation, a shopping centre and...
(Solved)
Happy Holidays Resort operates a leisure complex in Watamu Town. The company offers a
variety of facilities among which are sporting, accommodation, a shopping centre and a
restaurant.
The accountant of the resort is preparing a budget for the busy season which lasts for twenty
weeks. Eight weeks out of the twenty are considered to be peak period.
The accommodation facility comprises 80 single rooms and 40 double rooms. The prices charged
for double rooms are 150% of the single room rate
The following forecasts have been made:
1 Accommodation facility : Daily variable costs will be Sh.500 for single room
and Sh.700 for double room.
: Fixed costs will be Sh.1, 700,000.
2 Sporting facility : Resident charges will be Sh.200 per person per day.
:Casual customers will be charged Sh.500 per day, for
use of this facility
3 Restaurant facility :This facility will generate an average contribution of
Sh.300 per person per day
: Fixed cost will be Sh.2, 500,000.
4 Shopping centre facility : This facility will generate a contribution of
Sh.2,000,000.
5 Bookings : All rooms are booked for the peak season. For the
remainder of the busy season occupancy is expected to
be 60% for double rooms 70% for single rooms.
: On average, there will be 50 casual customers per
day. All customers are assumed to dine at the restaurant
and use the sports facility.
The resort's policy is that only two people can occupy a double room.
Required:
(i). Break – even rate per single room and double room.
(ii). If a profit of Sh.10 million is budgeted for on the accommodation facility alone, compute the
required rate per single and per double room.
(iii). If the leisure complex aims at earning Sh.10 million on accommodation, prepare the budgeted
complex statement for the complex
Date posted:
February 22, 2019
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Answers (1)
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State the limitations of break – even analysis.
(Solved)
State the limitations of break – even analysis.
Date posted:
February 22, 2019
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Answers (1)
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State the methods that a company can use to determine the break-even point or the output needed
to achieve a target operating income.
(Solved)
State the methods that a company can use to determine the break-even point or the output needed
to achieve a target operating income.
Date posted:
February 22, 2019
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Answers (1)
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Urembo Ltd. Produces and sell a wide range of homecare detergents. Currently the company has
sufficient spare capacity to undertake additional contracts.
Additional information:
1. The company absorbs...
(Solved)
Urembo Ltd. Produces and sell a wide range of homecare detergents. Currently the company has
sufficient spare capacity to undertake additional contracts.
Additional information:
1. The company absorbs production overhead using a rate of 200% on direct wages. The rate is
derived from the following budgeted figures:
Sh.
3. Urembo Ltd has a purchase order to supply Watalii Restaurant with 4,000 units of ,fresh'
beauty soap at Sh.32 each.
4. If the purchase order is accepted the normal budgeted sales of Urembo Ltd. Would be
affected adversely.
Required:
(i). Advise the management of urembo Ltd on whether to accept the purchase order from
Watalii Restaurant
(ii). Explain the principles that you have applied in arriving at the conclusion in (b) (i) above.
Date posted:
February 22, 2019
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Answers (1)
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Maridadi limited a privately owned company, specializes in the manufacture of these products
namely, hair combs, hair rollers and hair bands.
For the financial year commencing 1...
(Solved)
Maridadi limited a privately owned company, specializes in the manufacture of these products
namely, hair combs, hair rollers and hair bands.
For the financial year commencing 1 August 2008, the sales manager has prepared the following
two possible sales forecasts:
3. Direct labour cost will be restricted to a maximum of sh. 250,000 in the period. This is
assumed that labour is of the same grade and is freely transferable between products
4. Other resources are expected to be available
Required:
i. Identify the principal budget factor
ii. Calculate the sales budget mix that you would recommend to maximize profit
iii. Compute the maximum profit that could be generated by Maridadi limited.
Date posted:
February 22, 2019
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Answers (1)
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Rangi limited, a paint manufacturer produces two types of plant namely 'gloss' and 'Shine'
The following information relates to the company?s projections for the year ending...
(Solved)
Rangi limited, a paint manufacturer produces two types of plant namely 'gloss' and 'Shine'
The following information relates to the company‟s projections for the year ending 31 December
2008.
Required:
i. Compute the break-even point of Gloss in units and break-even point of „Shine” in
shillings
ii. Given that customers purchase composite units of sox for 'Gloss' and four for 'Shine'
calculate composite unit contribution margin.
iii. Given that customers purchase composite units of six for 'Gloss' and one litre of 'Shine'
calculate the composite contribution margin ratio.
iv. Determine the break even sales in shillings assuming that 'Gloss and Shine' become
components and that there is no change in the company's cost.
Date posted:
February 22, 2019
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Answers (1)
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ABC limited manufactures and sells a single product branded “Zed”. The following data has been
extracted from the budgets and standard costs to product “Zed”.
(Solved)
ABC limited manufactures and sells a single product branded 'Zed'. The following data has been
extracted from the budgets and standard costs to product 'Zed'.
Date posted:
February 22, 2019
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Answers (1)
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Westlife company limited manufacturers three products X, Y, and Z
The following data relating to the products is provided
(Solved)
Westlife company limited manufacturers three products X, Y, and Z
The following data relating to the products is provided
Required:
i. Optimal production mix that would result in the maximum profit
ii. Forecast ed profits statement using the optimal production mix in (b) (i) above
Date posted:
February 22, 2019
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Answers (1)