- 20 Marks
IMAC – April 2022 – L1 – Q2 – Budgeting
Preparation of functional budgets for Dampare Ltd and explanation of principal budget factor.
Question
a) Dampare Ltd manufactures three products namely A, B, and C. The information given below relates to the month of November 2020.
| Product | Quantity (Units) | Price/Unit (GH¢) |
|---|---|---|
| Sales: | ||
| A | 1,200 | 80 |
| B | 2,400 | 96 |
| C | 1,800 | 112 |
Materials used in company’s Products:
| Material | MA | MB | MC |
|---|---|---|---|
| Unit cost | GH¢3 | GH¢5 | GH¢8 |
| Quantity used in: | MA (Units) | MB (Units) | MC (Units) |
|---|---|---|---|
| Product A | 5 | 3 | 1 |
| Product B | 4 | 4 | 3 |
| Product C | 3 | 2 | 2 |
Finished Stock:
| Product A (Units) | Product B (Units) | Product C (Units) |
|---|---|---|
| Opening stock | 1,200 | 1,800 |
| Closing stock | 1,320 | 1,980 |
Material Stock:
| Material | MA (Units) | MB (Units) | MC (Units) |
|---|---|---|---|
| Opening stock | 31,200 | 24,000 | 14,400 |
| Closing stock | 37,440 | 28,800 | 17,280 |
Required: Prepare the following functional budget for the month of November 2020 for: i) Sales in quantity and value, including total value ii) Production quantities iii) Material usage in quantities iv) Material purchases in quantities and value, including total value. (15 marks)
b) Principal budget factor is such an important factor in the budgetary control process. It is essential to identify the principal budget factor before the preparation of budgets.
Required: i) Explain the term “Principal budget factor” as used in budgetary control. (2 marks) ii) Identify THREE (3) examples of Principal budget factor from financial institution. (3 marks)
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