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  • 13 Marks

PSAF – May 2018 – L2 – Q2 – The Budgeting Process in the Public Sector

Prepare a proposed budget for Imafidon Local Government Authority Happiness and Social Centres for the year ended December 31, 2019.

The Local Development Authorities (LDAs) of Imafidion Council agreed to transfer
their Social Centres for the purpose of adequate maintenance to the state
government‟s Ministry of Happiness. The state government accepted to take over
the centres and therefore requested for their 2019 budget. The following were
supplied by the Social Centres to the government through the Director of Accounts,
Ministry of Happiness.
Actual salaries, wages and overhead expenses (2018)

Other details provided include:

ii. The wages were for 5 employees (known as Happiness Assistants) paid on
hourly basis with maximum of 20 hours per week at N1,260 per hour, plus over
time bonus as follows:

The guideline for the budget has been given as follows:
i. Rent to remain as for last year since the lease would still be running for two
years, but security service providers would charge only N0.6m next year;
ii. No festival would be planned for the following year and as a result there
would be no promotion expenses and grant in the following year;
iii. Though same number of visitors would come to the centre, the rate of
admission fees would go up by 10 percent for the following year;
iv. There would be an increase of 5% on other incomes. The budget for Artifact
for sale would increase by the same proportion as the Sales in the Centre
budget which would increase by 20%;
v. Power/electricity and rates would increase by 8% and 2% respectively while
other supplies would increase by 2.5%;
vi. There would be 2.60% increase in wages, while the National Insurance
contributions would increase to 12% of salaries instead of the current 10%
and pension contribution would be 15% of salaries;
vii. Director of Finance, Ministry of Happiness would not be due for salary
increment but the Social Officer would earn increment of N0.088m;
viii. There would be no overtime payment; and
ix. Service level agreement was fixed at N2.948m.
You are required to prepare a proposed budget for Imafidon Local Government
Authority Happiness and Social Centres for the year ended December 31, 2019 (use
same format as in the Question). (Total 2O Marks)

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  • 20 Marks

PM – Mar/Jul 2020 – L1 – SB – Q2 – Budgetary Process and Behavioural Problems for Toby Nigeria

Discussion on budgeting and behavioral issues at Toby Nigeria Limited and redrafting of a budget statement.

Toby Nigeria Limited is a publishing company established in the early 1970s. The company has recently been taken over by Superior Quality Limited – a multinational company operating in Europe.
Mr. Edet Akpan, a staff of Superior Quality Limited, has been sent from the company’s headquarters to review, among other things, the budgeting and reporting system used by Toby Nigeria Limited.
During his visit to all the departments, he discovered that monthly budgets are prepared for each department in the company. Upon request, the last budget statement for the School Stationery Production Department (SSP) for period V was presented to him.
The budget statement presented was as follows:
Budget statement for period V
Department: SSP Department

Mr Tola Ademola, the School Stationery Manager, revealed that the budget statement presented was based on 40,000 units with a standard labour content of 3 hours per unit.
Mr. Akpan observed that Tola was not in any way enthusiastic about the budget system. He saw it as a pressure system imposed by the company’s top management to indict some of the managers. He pointed out that the system was hurriedly introduced by High Flyer Consults, about twelve months ago. The consultant never took time to talk to the managers or provide explanation that
could assist users to understand the system. The experienced School Stationery Manager was doubtful about the competence of the consultant. He was of the
opinion that the system introduced in Toby Nigeria Limited was either a ready-made one developed for another company or that the consultant did not understand the system well enough to give him the needed confidence to educate the users. He concluded by stating that he was sure his department made a loss as
against the positive figure recorded in the report and there was the possibility of reporting a loss at another period when profit was actually made. The situation reported above cuts across virtually all the departments and so the need to nip the situation in the bud became very urgent.
The task of making budgeting system more useful and acceptable in a biased environment like this, no doubt, seems difficult therefore, Mr. Akpan has requested from you an advice that will assist him in getting out of the woods.

Required:
a. Redraft the budget statement in a more informative manner. (12 Marks)
b. Discuss the behavioral problems brought out in this situation. (4 Marks)
c. Discuss the steps Mr. Akpan should take to remedy the situation. (4 Marks)

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  • 20 Marks

BMF – May 2017 – L1 – SB – Q5 – Basics of Business Finance and Financial Markets

Preparation of a cash budget for XYZ Automobiles Nigeria Limited for the three months ending March 31, 2017.

The following projections relate to XYZ Automobiles Nigeria Limited.

Month Sales (N) Purchases (N) Wages (N) Overheads (N)
November 2016 400,000 204,000 76,000 38,000
December 2016 420,000 200,000 76,000 42,000
January 2017 460,000 196,000 80,000 46,000
February 2017 500,000 200,000 84,000 48,000
March 2017 600,000 216,000 90,000 50,000

Additional information:

  1. Cash balance on January 1, 2017, is expected to be N80,000.
  2. A plant will be installed in November 2016 at a cost of N1,000,000 and the monthly installment of N50,000 is payable from January 2017.
  3. A sum of N30,000 will be paid as dividends in the month of March 2017.
  4. Company income tax of N45,000 will be due for payment in March 2017.
  5. Advance payment of N800,000 in respect of a sale of a truck will be received in March 2017.
  6. In line with the company’s policy, 50% of sales are on a cash basis. 50% of credit sales are collected in the month immediately following the month of sales while the balance is paid a month after the payment of the first installment.
  7. All purchases are on credit and the creditors are paid fully two months after the month of purchase.
  8. Wages and overheads are paid as and when due.

Required:

Prepare a cash budget for each of the THREE months ending March 31, 2017.

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  • 6 Marks

MA – May 2017 – L2 – Q2c – Budgetary control

Identify and explain three steps in the preparation of a Zero-Based Budget.

Zero-based budgeting attempts to improve upon incremental type of budgeting, which is perceived to carry over inefficiencies from previous periods. It allows for budget reductions and permits the re-allocation of resources from low to high priority programs. Critics are of the opinion that such an approach or process of budgeting can be cumbersome in its execution.

Required:

Identify and explain THREE steps in the preparation of Zero-Based Budget. (6 marks)

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  • 9 Marks

MA – May 2017 – L2 – Q2b – Budgetary control, Cash budgets and master budgets

Prepare the production and labour budgets for a manufacturing company for the first quarter of 2016.

Diminutive Limited is a manufacturing company situated at the Jubilee field that produces chemicals for oil production. The company is preparing its budget for the coming year. It expects to be able to sell 10,000 tonnes of its only product, the “Sparkle Oil,” in January 2016. Sales are then expected to rise to 11,000 tonnes in February and 14,000 tonnes in March and then remain stable for the rest of the year.

Diminutive Limited aims to carry a finished goods inventory at the end of each month equal to 10% of the following month’s sales. Each “Sparkle Oil” takes 2 hours of labour to make. Diminutive Limited’s 132 production workers are employed on contracts that require them to work a minimum of 160 hours per month and are each paid GH¢1,280 per month. Production workers are highly skilled and require a minimum of one year’s training. In the short term, it is not possible to recruit any more production workers. Any labour hours required in excess of 160 hours per worker are made up by overtime that is paid at the basic rate plus an overtime premium of 48% of the basic rate.

Required:

i) Prepare the production budget on a monthly basis for the first quarter of 2016. (3 marks)

ii) Prepare the labour budget for the first quarter of 2016 showing both hours and labour cost (assume that all production workers work at least 160 hours per month). (6 marks)

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  • 20 Marks

PSAF – Nov 2018 – L2 – Q3a – Public sector fiscal planning and budgeting

Prepare a budget for 2019 using 2018 as a base and analyze the budgeting approach.

a) You are the head of the Budget department of the Ministry of Works. The Ministry intends to prepare the budget for the 2019 fiscal year and has intended to use the 2018 budget as a base. Below is the detail of the 2018 Budget:

Assumptions for 2019 Budget: i) The Ministry has introduced new equipment, leading to a 36% increase in IGF, but government grants will be cut by GH¢9,600,000. ii) Established post salary will increase by GH¢3,920,000, non-established post salaries will increase to GH¢4,960,000, and allowances will increase by 15%. iii) Utility cost will decrease to GH¢9,700,000; repairs cost will increase by 9%; and training and seminar cost will increase to GH¢17,820,000. iv) The Ministry expects to acquire new equipment, increasing the equipment cost by GH¢150,000,000.

Required: Using the 2018 Budget as a base and assumptions made, prepare the Budget for the 2019 fiscal year. (10 marks)

b)
i) Identify and explain the type of Budget approach used by the Ministry in the Budget preparation. (2 marks)

ii) Explain THREE (3) merits and THREE (3) demerits of the Budget approach adopted in the preparation of the 2019 Budget. (3 marks)

iii) Explain an alternative approach you would have suggested to the Ministry for their subsequent budget preparation and explain THREE (3) reasons why that approach is appropriate under the circumstance. (5 marks)

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  • 13 Marks

PSAF – May 2018 – L2 – Q2 – The Budgeting Process in the Public Sector

Prepare a proposed budget for Imafidon Local Government Authority Happiness and Social Centres for the year ended December 31, 2019.

The Local Development Authorities (LDAs) of Imafidion Council agreed to transfer
their Social Centres for the purpose of adequate maintenance to the state
government‟s Ministry of Happiness. The state government accepted to take over
the centres and therefore requested for their 2019 budget. The following were
supplied by the Social Centres to the government through the Director of Accounts,
Ministry of Happiness.
Actual salaries, wages and overhead expenses (2018)

Other details provided include:

ii. The wages were for 5 employees (known as Happiness Assistants) paid on
hourly basis with maximum of 20 hours per week at N1,260 per hour, plus over
time bonus as follows:

The guideline for the budget has been given as follows:
i. Rent to remain as for last year since the lease would still be running for two
years, but security service providers would charge only N0.6m next year;
ii. No festival would be planned for the following year and as a result there
would be no promotion expenses and grant in the following year;
iii. Though same number of visitors would come to the centre, the rate of
admission fees would go up by 10 percent for the following year;
iv. There would be an increase of 5% on other incomes. The budget for Artifact
for sale would increase by the same proportion as the Sales in the Centre
budget which would increase by 20%;
v. Power/electricity and rates would increase by 8% and 2% respectively while
other supplies would increase by 2.5%;
vi. There would be 2.60% increase in wages, while the National Insurance
contributions would increase to 12% of salaries instead of the current 10%
and pension contribution would be 15% of salaries;
vii. Director of Finance, Ministry of Happiness would not be due for salary
increment but the Social Officer would earn increment of N0.088m;
viii. There would be no overtime payment; and
ix. Service level agreement was fixed at N2.948m.
You are required to prepare a proposed budget for Imafidon Local Government
Authority Happiness and Social Centres for the year ended December 31, 2019 (use
same format as in the Question). (Total 2O Marks)

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  • 20 Marks

PM – Mar/Jul 2020 – L1 – SB – Q2 – Budgetary Process and Behavioural Problems for Toby Nigeria

Discussion on budgeting and behavioral issues at Toby Nigeria Limited and redrafting of a budget statement.

Toby Nigeria Limited is a publishing company established in the early 1970s. The company has recently been taken over by Superior Quality Limited – a multinational company operating in Europe.
Mr. Edet Akpan, a staff of Superior Quality Limited, has been sent from the company’s headquarters to review, among other things, the budgeting and reporting system used by Toby Nigeria Limited.
During his visit to all the departments, he discovered that monthly budgets are prepared for each department in the company. Upon request, the last budget statement for the School Stationery Production Department (SSP) for period V was presented to him.
The budget statement presented was as follows:
Budget statement for period V
Department: SSP Department

Mr Tola Ademola, the School Stationery Manager, revealed that the budget statement presented was based on 40,000 units with a standard labour content of 3 hours per unit.
Mr. Akpan observed that Tola was not in any way enthusiastic about the budget system. He saw it as a pressure system imposed by the company’s top management to indict some of the managers. He pointed out that the system was hurriedly introduced by High Flyer Consults, about twelve months ago. The consultant never took time to talk to the managers or provide explanation that
could assist users to understand the system. The experienced School Stationery Manager was doubtful about the competence of the consultant. He was of the
opinion that the system introduced in Toby Nigeria Limited was either a ready-made one developed for another company or that the consultant did not understand the system well enough to give him the needed confidence to educate the users. He concluded by stating that he was sure his department made a loss as
against the positive figure recorded in the report and there was the possibility of reporting a loss at another period when profit was actually made. The situation reported above cuts across virtually all the departments and so the need to nip the situation in the bud became very urgent.
The task of making budgeting system more useful and acceptable in a biased environment like this, no doubt, seems difficult therefore, Mr. Akpan has requested from you an advice that will assist him in getting out of the woods.

Required:
a. Redraft the budget statement in a more informative manner. (12 Marks)
b. Discuss the behavioral problems brought out in this situation. (4 Marks)
c. Discuss the steps Mr. Akpan should take to remedy the situation. (4 Marks)

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  • 20 Marks

BMF – May 2017 – L1 – SB – Q5 – Basics of Business Finance and Financial Markets

Preparation of a cash budget for XYZ Automobiles Nigeria Limited for the three months ending March 31, 2017.

The following projections relate to XYZ Automobiles Nigeria Limited.

Month Sales (N) Purchases (N) Wages (N) Overheads (N)
November 2016 400,000 204,000 76,000 38,000
December 2016 420,000 200,000 76,000 42,000
January 2017 460,000 196,000 80,000 46,000
February 2017 500,000 200,000 84,000 48,000
March 2017 600,000 216,000 90,000 50,000

Additional information:

  1. Cash balance on January 1, 2017, is expected to be N80,000.
  2. A plant will be installed in November 2016 at a cost of N1,000,000 and the monthly installment of N50,000 is payable from January 2017.
  3. A sum of N30,000 will be paid as dividends in the month of March 2017.
  4. Company income tax of N45,000 will be due for payment in March 2017.
  5. Advance payment of N800,000 in respect of a sale of a truck will be received in March 2017.
  6. In line with the company’s policy, 50% of sales are on a cash basis. 50% of credit sales are collected in the month immediately following the month of sales while the balance is paid a month after the payment of the first installment.
  7. All purchases are on credit and the creditors are paid fully two months after the month of purchase.
  8. Wages and overheads are paid as and when due.

Required:

Prepare a cash budget for each of the THREE months ending March 31, 2017.

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  • 6 Marks

MA – May 2017 – L2 – Q2c – Budgetary control

Identify and explain three steps in the preparation of a Zero-Based Budget.

Zero-based budgeting attempts to improve upon incremental type of budgeting, which is perceived to carry over inefficiencies from previous periods. It allows for budget reductions and permits the re-allocation of resources from low to high priority programs. Critics are of the opinion that such an approach or process of budgeting can be cumbersome in its execution.

Required:

Identify and explain THREE steps in the preparation of Zero-Based Budget. (6 marks)

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  • 9 Marks

MA – May 2017 – L2 – Q2b – Budgetary control, Cash budgets and master budgets

Prepare the production and labour budgets for a manufacturing company for the first quarter of 2016.

Diminutive Limited is a manufacturing company situated at the Jubilee field that produces chemicals for oil production. The company is preparing its budget for the coming year. It expects to be able to sell 10,000 tonnes of its only product, the “Sparkle Oil,” in January 2016. Sales are then expected to rise to 11,000 tonnes in February and 14,000 tonnes in March and then remain stable for the rest of the year.

Diminutive Limited aims to carry a finished goods inventory at the end of each month equal to 10% of the following month’s sales. Each “Sparkle Oil” takes 2 hours of labour to make. Diminutive Limited’s 132 production workers are employed on contracts that require them to work a minimum of 160 hours per month and are each paid GH¢1,280 per month. Production workers are highly skilled and require a minimum of one year’s training. In the short term, it is not possible to recruit any more production workers. Any labour hours required in excess of 160 hours per worker are made up by overtime that is paid at the basic rate plus an overtime premium of 48% of the basic rate.

Required:

i) Prepare the production budget on a monthly basis for the first quarter of 2016. (3 marks)

ii) Prepare the labour budget for the first quarter of 2016 showing both hours and labour cost (assume that all production workers work at least 160 hours per month). (6 marks)

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  • 20 Marks

PSAF – Nov 2018 – L2 – Q3a – Public sector fiscal planning and budgeting

Prepare a budget for 2019 using 2018 as a base and analyze the budgeting approach.

a) You are the head of the Budget department of the Ministry of Works. The Ministry intends to prepare the budget for the 2019 fiscal year and has intended to use the 2018 budget as a base. Below is the detail of the 2018 Budget:

Assumptions for 2019 Budget: i) The Ministry has introduced new equipment, leading to a 36% increase in IGF, but government grants will be cut by GH¢9,600,000. ii) Established post salary will increase by GH¢3,920,000, non-established post salaries will increase to GH¢4,960,000, and allowances will increase by 15%. iii) Utility cost will decrease to GH¢9,700,000; repairs cost will increase by 9%; and training and seminar cost will increase to GH¢17,820,000. iv) The Ministry expects to acquire new equipment, increasing the equipment cost by GH¢150,000,000.

Required: Using the 2018 Budget as a base and assumptions made, prepare the Budget for the 2019 fiscal year. (10 marks)

b)
i) Identify and explain the type of Budget approach used by the Ministry in the Budget preparation. (2 marks)

ii) Explain THREE (3) merits and THREE (3) demerits of the Budget approach adopted in the preparation of the 2019 Budget. (3 marks)

iii) Explain an alternative approach you would have suggested to the Ministry for their subsequent budget preparation and explain THREE (3) reasons why that approach is appropriate under the circumstance. (5 marks)

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