Budget Manual – NBC Institute

MA – Nov 2018 – L2 – Q2b – Budgetary control

Preparation of a budgeted profit and loss account for Uswa Ltd and explanation of the term "budget manual."

Question

Uswa Ltd is engaged in manufacturing and sale of footwear. The company maintains one central factory and warehouse and sells its products through company-operated retail outlets as well as through distributors. Management is in the process of preparing the budget for the year 2018 on the basis of the following information:

The marketing director has provided the following annual sales projections:

Category	No. of Units	Retail Price Range (GH¢)
Men	1,200,000	100 – 400
Women	500,000	85 – 250

It has been estimated that 30% of the units would be sold through distributors who paid GH¢95 and GH¢70 per footwear for men and women respectively.
The remaining 70% will be sold through company-operated retail outlets.
The previous pattern of sales indicates that 60% of these units are sold at the minimum price; 10% units are sold at the maximum price and remaining 30% at a price of GH¢200 and GH¢120 per footwear for men and women respectively.
The company incurs a variable cost of GH¢45 per footwear regardless of whether sales are through company-operated retail outlet or distributors.
The company operates 22 outlets all over the country. The fixed costs per outlet are GH¢12,000 per month and include rent, electricity, maintenance, etc.
Fixed costs for the factory and head office are GH¢4.5 million and GH¢1.5 million per month respectively.

Required:

i) Prepare a budgeted profit and loss account for the year 2018 for Uswa Ltd. (13 marks)

ii) Explain the term “budget manual.” (2 marks)

Answer

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Tags: Budget Manual, Budgeting, Cost Accounting, Profit and Loss, Retail Operations
Level: Level 2

Topic: Budgetary control
Series: NOV 2018

IMAC – NOV 2023 – L2 – Q2 – Budgeting

Discuss the contents of a budget manual, explain incremental and zero-based budgeting, and prepare budgeted profit and loss statement and financial position for Chico Ltd.

Question

a) As organisations become larger and more complex, it is no longer possible for just one person to prepare a budget. Instead, budgeting across the organisation must be carefully coordinated among various actors. As a result, there is the need for a budget manual irrespective of the type of or approach to budgeting.

Required:
i) State FIVE (5) contents of a budget manual. (5 marks)
ii) Write short notes on the following:

Incremental budget. (2.5 marks)
Zero-Based Budget. (2.5 marks)

b) Chico Ltd, a newly established manufacturing company with branches across Africa is preparing its first annual budget. The following information is relevant:

Sales forecast for each month:

Month	Sales Forecast (GH₵)
January to June	20,000
July to December (and thereafter)	22,000

Gross profit margin: 20%
Credit given to customers: 2 months
Credit taken from suppliers: 2 months
Closing inventory: 3 months of demand
Monthly operating expenses: GH₵1,222

At the start of the budget period, a non-current asset with a cost of GH₵120,000 and a useful life of 6 years was purchased and transferred to one of its branches. In addition, a cash amount of GH₵80,000 was provided for the operations of Chico Ltd.

Required:
Prepare the budgeted statement of profit or loss and budgeted statement of financial position for Chico Ltd. (10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budget Manual, Budgeted Financial Position, Budgeted Profit or Loss, Incremental Budget, Zero-Based Budget
Level: Level 1

Topic: Budgeting
Series: NOV 2023

IMAC – NOV 2021 – L1 – Q1 – Budgeting

CVP analysis with calculation of contribution/sales ratio, total fixed costs, and breakeven sales value. Preparation of a flexed budget and identification of budget manual rules.

Question

a) Cost-Volume-Profit (CVP) analysis is a way to find out how changes in variable and fixed costs affect a firm’s profit. Companies can use CVP to assess the impact on profit taking into consideration some assumptions.

Required:
State FIVE (5) assumptions underlying Cost-Volume-Profit Analysis. (5 marks)

b) The following data has been extracted from the operating records of Sharp Production Ltd:

Year	Costs (GH¢)	Profit (GH¢)
2019	402,000	54,000
2020	510,000	90,000

Required: i) Calculate the contribution/sales ratio for the company. (5 marks) ii) Compute the total fixed costs per annum. (5 marks) iii) Compute the sales value required to breakeven. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Breakeven Analysis, Budget Manual, Contribution/Sales Ratio, CVP Analysis, Fixed Costs, Flexed Budget
Level: Level 1

Topic: Budgeting
Series: NOV 2021

MA – Nov 2018 – L2 – Q2b – Budgetary control

Preparation of a budgeted profit and loss account for Uswa Ltd and explanation of the term "budget manual."

Question

The marketing director has provided the following annual sales projections:

Category	No. of Units	Retail Price Range (GH¢)
Men	1,200,000	100 – 400
Women	500,000	85 – 250

It has been estimated that 30% of the units would be sold through distributors who paid GH¢95 and GH¢70 per footwear for men and women respectively.
The remaining 70% will be sold through company-operated retail outlets.
The previous pattern of sales indicates that 60% of these units are sold at the minimum price; 10% units are sold at the maximum price and remaining 30% at a price of GH¢200 and GH¢120 per footwear for men and women respectively.
The company incurs a variable cost of GH¢45 per footwear regardless of whether sales are through company-operated retail outlet or distributors.
The company operates 22 outlets all over the country. The fixed costs per outlet are GH¢12,000 per month and include rent, electricity, maintenance, etc.
Fixed costs for the factory and head office are GH¢4.5 million and GH¢1.5 million per month respectively.

Required:

i) Prepare a budgeted profit and loss account for the year 2018 for Uswa Ltd. (13 marks)

ii) Explain the term “budget manual.” (2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budget Manual, Budgeting, Cost Accounting, Profit and Loss, Retail Operations
Level: Level 2

Topic: Budgetary control
Series: NOV 2018

IMAC – NOV 2023 – L2 – Q2 – Budgeting

Discuss the contents of a budget manual, explain incremental and zero-based budgeting, and prepare budgeted profit and loss statement and financial position for Chico Ltd.

Question

Required:
i) State FIVE (5) contents of a budget manual. (5 marks)
ii) Write short notes on the following:

Incremental budget. (2.5 marks)
Zero-Based Budget. (2.5 marks)

b) Chico Ltd, a newly established manufacturing company with branches across Africa is preparing its first annual budget. The following information is relevant:

Sales forecast for each month:

Month	Sales Forecast (GH₵)
January to June	20,000
July to December (and thereafter)	22,000

Gross profit margin: 20%
Credit given to customers: 2 months
Credit taken from suppliers: 2 months
Closing inventory: 3 months of demand
Monthly operating expenses: GH₵1,222

Required:
Prepare the budgeted statement of profit or loss and budgeted statement of financial position for Chico Ltd. (10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Budget Manual, Budgeted Financial Position, Budgeted Profit or Loss, Incremental Budget, Zero-Based Budget
Level: Level 1

Topic: Budgeting
Series: NOV 2023

IMAC – NOV 2021 – L1 – Q1 – Budgeting

CVP analysis with calculation of contribution/sales ratio, total fixed costs, and breakeven sales value. Preparation of a flexed budget and identification of budget manual rules.

Question

Required:
State FIVE (5) assumptions underlying Cost-Volume-Profit Analysis. (5 marks)

b) The following data has been extracted from the operating records of Sharp Production Ltd:

Year	Costs (GH¢)	Profit (GH¢)
2019	402,000	54,000
2020	510,000	90,000

Required: i) Calculate the contribution/sales ratio for the company. (5 marks) ii) Compute the total fixed costs per annum. (5 marks) iii) Compute the sales value required to breakeven. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Breakeven Analysis, Budget Manual, Contribution/Sales Ratio, CVP Analysis, Fixed Costs, Flexed Budget
Level: Level 1

Topic: Budgeting
Series: NOV 2021

Question Tag: Budget Manual

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MA – Nov 2018 – L2 – Q2b – Budgetary control

Preparation of a budgeted profit and loss account for Uswa Ltd and explanation of the term "budget manual."

IMAC – NOV 2023 – L2 – Q2 – Budgeting

Discuss the contents of a budget manual, explain incremental and zero-based budgeting, and prepare budgeted profit and loss statement and financial position for Chico Ltd.

IMAC – NOV 2021 – L1 – Q1 – Budgeting

CVP analysis with calculation of contribution/sales ratio, total fixed costs, and breakeven sales value. Preparation of a flexed budget and identification of budget manual rules.

MA – Nov 2018 – L2 – Q2b – Budgetary control

Preparation of a budgeted profit and loss account for Uswa Ltd and explanation of the term "budget manual."

IMAC – NOV 2023 – L2 – Q2 – Budgeting

Discuss the contents of a budget manual, explain incremental and zero-based budgeting, and prepare budgeted profit and loss statement and financial position for Chico Ltd.

IMAC – NOV 2021 – L1 – Q1 – Budgeting

CVP analysis with calculation of contribution/sales ratio, total fixed costs, and breakeven sales value. Preparation of a flexed budget and identification of budget manual rules.

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MA – Nov 2018 – L2 – Q2b – Budgetary control

Preparation of a budgeted profit and loss account for Uswa Ltd and explanation of the term "budget manual."

You're reporting an error for "MA – Nov 2018 – L2 – Q2b – Budgetary control"

IMAC – NOV 2023 – L2 – Q2 – Budgeting

Discuss the contents of a budget manual, explain incremental and zero-based budgeting, and prepare budgeted profit and loss statement and financial position for Chico Ltd.

You're reporting an error for "IMAC – NOV 2023 – L2 – Q2 – Budgeting"

IMAC – NOV 2021 – L1 – Q1 – Budgeting

CVP analysis with calculation of contribution/sales ratio, total fixed costs, and breakeven sales value. Preparation of a flexed budget and identification of budget manual rules.

You're reporting an error for "IMAC – NOV 2021 – L1 – Q1 – Budgeting"

MA – Nov 2018 – L2 – Q2b – Budgetary control

Preparation of a budgeted profit and loss account for Uswa Ltd and explanation of the term "budget manual."

You're reporting an error for "MA – Nov 2018 – L2 – Q2b – Budgetary control"

IMAC – NOV 2023 – L2 – Q2 – Budgeting

Discuss the contents of a budget manual, explain incremental and zero-based budgeting, and prepare budgeted profit and loss statement and financial position for Chico Ltd.

You're reporting an error for "IMAC – NOV 2023 – L2 – Q2 – Budgeting"

IMAC – NOV 2021 – L1 – Q1 – Budgeting

CVP analysis with calculation of contribution/sales ratio, total fixed costs, and breakeven sales value. Preparation of a flexed budget and identification of budget manual rules.

You're reporting an error for "IMAC – NOV 2021 – L1 – Q1 – Budgeting"

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