Case Study 3

Khalid LLC Trading Company has produced 12,500 units which is 25% capacity level in the factory. The company has used raw material to make the production worth of RO 33 per unit. The company has incurred direct labour cost at RO 31per unit along with direct expenses RO 29 per unit. The company spent RO 122,500 on fixed expenses in the factory with per unit cost of RO 9.8. Other factor expenses for the total production of 12,500 units has arrived at RO 13 per unit. Administration expenses were incurred RO 14 per unit out of which fixed expenses belongs to 40%. Company has appointed a salesman for selling the products produced in the company at RO 15 per unit produced out of which 25% belongs to fixed. The company has also incurred distribution expenses of RO 16 per unit out of which 30% are variable.

Requirements: The company has approached the you and ask to prepare the flexible budgets for two more required capacity levels; -

1. 15,000 units. [2.5 Marks]
2. 17,000 units. [5 Marks]

Case Study 4

Ameer Trading Company is dealing in different kinds of buying and selling of electronics products to vast range of customers in Sohar region and provided the following data to understand the cash position every month start from January to July. The sales book reported the sales amount for seven months as below: -

January	February	March	April	May	June	July
325,000	320,000	319,000	345,000	365,000	326,500	314,500

The sales reported every month including cash sales and credit sales. Cash sales constitute 40% of total sales collected in the month of sales and the balance is credit sales received in the month following the month of sales.

The detail of goods purchased in cash during seven months reported in purchase book as below: -

January	February	March	April	May	June	July
26,500	28,500	29,500	27,500	23,500	24,800	22,000

Company also purchased goods on credit from different suppliers. The detail of credit purchase from the month January to July is given below: -

January	February	March	April	May	June	July
125,000	111,600	126,500	145,600	132,500	115,000	116,000

Cash purchases payable in the month of purchases and credit purchases are payable to supplier in two months following the month of credit purchase.

It is also found from the accounting records that the company has purchased a plant and equipment for RO 22,000 in March and it is payable in two equal instalments starting from April. Tax department has sent a notice to the company to pay taxes of RO 6,750 each in the month of May and June.

The wages and office expenses are paid in the month following the month in which wages and office expenses incurred. The detail of wages and office expenses is given below: -

	January	February	March	April	May	June	July
Wages	2,250	2,200	2,150	2,650	2,350	2,450	2,260
Office Expenses	3,300	3,150	3,250	3,160	3,160	3,280	3,120

The selling expenses of the company recorded for the seven months are as follows: -

January	February	March	April	May	June	July
1,250	1,650	1,450	1,680	1,290	1,780	1,500

The company also incurred administrative expenses for the period January to July. The detail of administrative expenses is given as below: -

January	February	March	April	May	June	July
1,600	1,650	1,750	1,650	1,890	1,990	2,020

The company is paying the selling and administration expenses in two months following the month in which such expenses incurred.

The cash balance as on 1^st April is RO 47,800.

Requirement: The Company has requested you to prepare Cash budget for the period of April to June. [10 Marks]