Problem 1 - Planning and Control
Write an essay on demonstrating your conceptual understanding of the following Problems.
1. Is budgeting used primarily for scorekeeping, attention, directing or problem solving?
2. How do strategic planning, long range planning and budgeting differ?
3. Why is budgeted performance better than past performance as a basis for judging actual results?
4. What are the major benefits of budgeting?
5. Is budgeting an unnecessary burden for day to day problems? Explain your answer.
6. Why is the sales forecast the starting point for budgeting?
7. How do Spreadsheets aid the application of sensitivity analysis?
Problem 2 - Budget Preparation - Intellectual and Practical Skills
Application of learning:
Prepare the following budgets for the 6 months ending September 2013. You are required to use Excel spreadsheets, which can be copied into word once you finish, should you wish. A template is available for you to use as a basis.
a) Sales budget
b) Cash Budget
c) Debtors Budget
d) Creditors Budget
e) Production Cost Budget
f) Raw Materials and finished goods Budget
g) Profit and Loss Account Budget
h) Balance Sheet Budget
Draw conclusions from your budgets and prepare a short management report.
|
Europe Ltd
Balance Sheet as at 31st March 2013
|
|
Fixed Assets
|
£
|
£
|
|
Current Assets
|
|
100,000
|
|
Debtors (Feb E10000, March E14000)
|
24,000
|
|
|
Stock Raw Materials
|
9,000
|
|
|
Finished Goods
|
13,000
|
|
|
|
46,000
|
|
|
Current Liabilities
|
|
|
|
Creditors (Feb E8000, March E10000)
|
18,000
|
|
|
Bank
|
(3,000)
|
|
|
|
21,000
|
|
|
Net Current Assets / Working Capital
|
|
25,030
|
|
NET ASSETS
|
|
125,000
|
|
Financed by:
|
|
|
|
Share Capital
|
|
100,000
|
|
Profit and Loss
|
|
25,000
|
|
TOTAL SHAREHOLDERS FUNDS
|
|
125,000
|
Notes:
-Fixed Assets are depreciated at 20% straight line method per year.
-Purchases will be £5,000 in April, increasing by £1000 per month and paid 2 months after purchase.
-Sales in April will be £20,000, increasing by £2,000 per month and paid 2 months in arrears.
-Production costs per unit will be:
o Direct materials £15
o Direct Labour £12
o Production overheads £5
-Direct Labour and production overheads are paid as they are incurred.
-Production units per month are 500 units
-Sales units in April are 400 units, increasing by 40 units per month.
-Expenses run at £10,000 per month, paid in the month that they are incurred.