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Financial Management
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0% found this document useful (0 votes)
85 views10 pagesBudgeting Solution 9-6-2023 09-Jun-2023 20-13-09
Financial Management
Uploaded by
Joh TzCopyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF or read online on Scribd
/ 10
INSTITUTE OF
ne Project Financial Manse
ion One ANd Budgetary ¢
“on
is preparing its budget f
pr Recttdget for the your ending 340
NS Pen collected to facilitate the pak 3!" Dec
mber 2022. The follo
widgeting exerey et 2022. The following
Sales
The company mani
Sty manufactures and sells two
budget Prtiod, the company expects the den,
mand for product B to be 7,500 unite The unit sett s
re TZS 600 and TZS 700 respectively, ae nasi
Production
|. Material requirements per unit of output:
Material x Material Y Material Z,
Product: (Kilos) (Liters) (Units)
A 3 1s -
B 5 3 2
Cost TZS 24 per Kilo TZS 16 per Liter TZS 20 per Unit
2. Labor requirements per unit of output:
Department 1 Department 2
Product A
Unskilled labor 4 2
Semi-skilled labor 1 1
Product B i
Unskilled labor : 3
Semi-skilled labor
3. Labor rates per hour:
Unskilled labor TZS 20
Semi-skilled labor TZS 30
ion Overheads: ;
v ste preitin overheads are absorbed at the following rates
arial
Department r yr hours
‘S10 per direct labo
it 1: TZ
Fixed prod tion sar are absorbed at a rate of TZS 5 per direct labor hour
Other overheads [all fixed] amount to TZ: 10,000 pa.
r overheads [all fixed] amount $ 1,2 P. Beginning and Ending Inventories
The following inventory levels are exps
Work in progress
{Both beginning and ending inventories: 100%
Product A
Anticipated beginning inventories
1,000
500
2,000
Target ending inventorie
1,200
500
1,100
complete for materials, 50% converted]
P 0 0
Product B 250 Units ou
Finished goods
Product A 100 a0)
Product B 1,200 Sug, \e % paahese
a ON ea 2 V7
Required ATR Mer Wee
You are requested to prepare an operating budgeig{with supporting schedules] for the
period ending 31" December 2022 [
Suppose; in addition to the details in the preceding example; we had the followi
additional information; you are required to prepare a manpower budget for unskilled
labor:
Labor efficiency 95%
Absentee rate a
Number of working weeks per year 46 weeks
Number of working days per week 5 days
Number of working hours per day B hours
Planned overtime: ae
poem 1840 hous
UNTANCY ARUSHA
BUDGETING fad BUDGETORY ‘CONTROL SUGGESTED SOLUTION QUESTION ONE
Wi: SALES BUDGET i Selling price [Totalrevenue
Product No of units amo TT { 725 6 000,000"
A. 7,500 72S 700 | ___128 5,250,000
B ; TOTAL 725 11,250,000 Product A (No WIP)
Product B (This nceds two columns as it
enna 50% converted in-torms of WIP wile & does
| [not have it)
= Materials (100% | Conversion costs 50%
geted sales units complete) | complete i.
Add: # Casing stocks 10,000 7,500 | 7,500 complete
inished goods | Obs on
we 450 500| 500 complete FG at \up/,
Total needs in units o 400) 200a850% Crave eR
| eee: Opening stocks | ey saad | 5200
taishedl geri (to, (1,200) | (1,200) Complete 2150)
| 9 compl
| Production needs in units 40,350 Gale
[eaters ene |
W3: DIRECT MATERIALS USAGE BUDGET
From production budget: Material X Material Y Material Z ]
Product A= 10,350x 3kg 31,050 | 10,350x1.5 =15,625 1 10,350x0= 0 |
Product B= 6,950 x 5kg 34,750 | _6950x3= 20850 | _6.980x2= 13.900 |
(Raw material usage budget 65,800 36,375 13,900 |
‘Note: materials is 100% complete Le. wil lake 6,950 units whi labour and FOH and VOH wil take
the equivalent 6,875 units
W4: DIRECT MATERIALS PURCHASE BUDGET
Materials X | Materials Y [MateriaisZ
From direct materials usage budget 65,800 36,375 13,900 |
‘Add: closing stock RM 4,200 500, 10
Toes needs 67,000 36,875 |
Less: Opening stock of RM {1,000) a on I
RM needed for purchase 6 aa i
| Cost per kg or tre or units 128 24 Zan 12829 |
ZS 260,000
RM purchase costs FZs 1,584,000 | 12S 582,000 | oe aeien| a0
TOTAL RM COSTS fad i
23= won v1) c
WS: DIRECT LABOUR COST BUDGET (gore IN DEPERTMENT 1 AND a oe Neer)
From Production needs (in units) __| Unski 62,100 40,350x2 = 20,700 |
Product A=10,350x6 hrs $5,000 6,875 Eq, x3 = 20.625
Product B= 6,875 Eq, units x 8hrs ae 4325 |
Total direct labour hours 12520 12830 |
Direct labour rate per hour —yas7ai0.000 | [128 1.280750 |
Total Direct labour budget TOTALL 283,581,750 | Nai VARIABLE PRODUCTION OVERHEAD BUDGET (COMPUTATION OF RATE PER UNM)
Note: the rate per
PRODUCT A:
Department 1 Shrs x TZS 10 =T2s
er hour = TZ 0
ToRament 2 = Bhs x 72S 8 por hour= 128.24
AL Tes 74 Jooit
hour was different in all departmonts
PRODUCT B:
Department 1 = 6 hrs x TZS 10 =
er hour = TZS 60
Department 2 = 5 hrs x TZS 8 perhour = 178 40
TOTAL I 100 /
W7: FIXED OVERHEAD BUDGET (FIXED OH ABSORPTION RATE PER UNIT)
Note: the rate per
PRODUCT A
otal hours in all departments = 8 hrs x TZS 5 per hour = 128 40 /\y{
PRODUCT B a at
Total hours in all departments = 11 hrs x TZS 5 per hour = TZS S5/unit
hour is the same in all departments
WE: PRODUCTION OVERHEADS ABSORBED = wyannGaclaning wd) ae
[ FROM PRODUCTION DATA: VARIABLE, FIXED = |
PRODUCT A= 10,350units x TZS 74 per unit TZS 765,900 10,5004 |
| PRODUCT B= 6 876unts x 125 100 per unit TZS 687,500 6,875x5: 125 |
{ Total OH absorbed to production 72S 1,453,400 [=F TZS 792,125
[TOTAL VARIABLE AND FIXED ABSORBED _ 1,453,400 + 792,425 = 2,245,525
W3: TOTAL PRODUCT COST PER UNIT (WILL BEUSED IN INVENTORY VALUATION) FOR. 9
COGSBUDGET \% Costs, wal Mal out {Voth t Fott aN 7 dd CRT,
[DIRECT MATERIALS a PRODUCT A PRODUCTB
X= 3kg x TZS 24 per kg eat T2S72| —5kg x TLS 24 per kg= TZS 120
Ye 1strxT2s 16 per ltr TZS24| ltrs x TZS 16 per tr= TZS 48
Z=O units x TZS 20 per unit 1280) Qunits x 72S 20 per uni
ae ae i 128 96 | an
DIRECT LABOUR sa
Unskilled = 6 hours x TZS 20 per hour | Tea a
Semi-skilled = 2 hours x TZS 30 per hour | ee
[PRODUCTION OVERHEADS 0} 7
Variable OH (see W6) 1zs40|_
Fixed OH (See W7) 725 390
Total cost per unit : IN PROGRE
Direct materials 100% comple
250 units x 100% x TZS 208,
Labour 50% converted =
250 units x 50% x TZS 250
VOH 50% converted = 250 units x50%xTZS100
FOH 50% converted = 250 unitsx50%xTZS 55
BEGGINING
ENTORY Vv
ALUATION (WILL GO TO THE MANUFACTURING BUDGET)
(c) FINISHED GOODS
Product A = 100 units x TZS 390 per unit
a ENDING
S 24,000 1,200 x 24 = TZS 26,800
T2S 8,000 500 x 16 = TZS 8,000
T2S 40,000 1,100 x 20 = TZS 22,000 |
TZS 72,000 ZS 58,800 |.“
TZS 62,000 |, 400x100%xTZS 208 = 125 83,200 _-
TZS 31,250 | - 400x50%xTZS 250 = 12S 60,000 |,
TZS 12,500 400x50%xTZS 100 =TZS 20,000 a
TZS 6,875 \V_400x50%xTZS 55 = TZS 11,0004”
Tzst065[ Te |
|
~TZS 39,000") 450units x TZS 390 = TZS 175,500
Product B = 1,200 units x TZS 613 per unit TZS 735,600'/ 500 units x TZS 613 = TZS 306,500
TZS 774,600 | TZS 482,000 |
W11: COST OF GOODS MANUFACTURED Pooley L = ==
Opening WIP (see W10) : — | 10265 |
‘Add: Manufacturing costs: rae
Opening stock RM (See W10) ey
‘Add: Purchases of RM (See W4) 2a.
RM available for production 8
Less; Closing stock RM (See W10) | 2,439,200 Y
Direct Materials used in ous 3,581,750 ¥
Direct labour costs (see WS | 2,245,525 ~~
Production overheads variable and fixed (see W8) 4.369, 100
TOTAL PRODUCT COSTS | 164,200)4/”
Less: Closing WIP (see W10) | | 8,204,900
GOST OF GOODS MANUFACTURED
; D INCOME STATEMENT 1 sal
w12; BUDGETE! = a 2S a =|
Sales (Wi) |
: Cost of sales: 774,600
= ‘Opening stock of FG Oe