Lesco sells office equipment and is preparing the budget for the next month. Extract of the details are as follows: Opening inventory (units) Budgeted sales (units) Selling price per unit BAX 63 290 120 DAX 36 120 208 FAX 90 230 51

Closing inventory is 30% of sales units for the month. All three products are made using Material A, Material B, Labour grade C and labour grade D. The quantities are as follows: Material A (meters) Material B (cubic meters) Labour C (hours) Labour D (hours) BAX 4 2 3 2 DAX 5 3 5 8 FAX 2 1 2 - Cost $12 per meter $7 per meter $4 per hour $6 per hour

Lescos opening inventory of Material A is 142 meters and 81 cubic meters of Material B. He intends to increase this during April, so that there is sufficient raw materials to produce 50 units of each item of equipment. Calculate the following: a) Budgeted sales revenues for the period (5 marks) b) Budgeted production of BAX, FAX and DAX for the month (6 marks) c) The budgeted wage of Material A for the month (3 marks) d) Budgeted cost of labour for the month (3 marks) e) Budgeted purchases of material A for the month (3 marks) f) Budgeted gross profit for the month (5 marks)

Question 2 The Valder Ltd. commenced operations in December 2019 with a capital of $600,000 which was raised through an issue of 600,000 ordinary shares of $1 each. The proceeds of the share issue were paid into the company bank account. During the course of December, a number of transactions took place and these are summarized below:

Cash summary December 2019 $ $ Proceeds from share issue 600,000 Less Leasehold premises (20 years) 300,000 Plant (est. life 10 years) 80,000 Equipment (est. life 10 years) 160,000 Tools 20,000 Raw materials 10,000 570,000 Cash balance available 30,000

The following additional information is available. i. Sales are budgeted as follows: $80,000 in January; $160,000 in February and $240,000 in subsequent months. Fifty per cent of the sales will be cash sales and the other fifty per cent credit sales. The period of credit extended to customers will be one month. ii. The cost of raw materials will amount to 40% of the sales revenue. Half the materials cost for any one month will be paid in cash; the other half will be paid for during the month of purchase. The company intends to keep a stock of raw materials of $10,000 throughout the year. iii. Direct wages will be incurred at the rate of $50,000 per month. No time lag is expected here. iv. Other expenses- depreciation on premises, plant and equipment will be calculated on a straight-line basis. The tools will be re-valued annually and it is expected that annual losses will amount to 20 per cent. Tools are planned to be sold for $18,000 in May before the semi-annual stock count. v. All other expenses will be incurred at the rate of $40,000 per month- payable one month in arears vi. Taxation of $25,000 are to be paid quarterly in order to clear the outstanding balance.

You are required to:

a. Prepare a cash budget for the first six months of 2020 for Valder Company. (25 marks)

Question 3 Sidney Company Ltd manufactures a single product. Details of the budgeted and actual results are as follows for the month of March 2023: Budget Actual results Production and sales (units) 2000 3000 $ $ Sales revenue 20,000 30,000 Direct materials 6,000 8,500 Direct labour 4,000 4,500 Maintenance 1,000 1,400 Depreciation 2,000 2,200 Rent and rates 1,500 1,600 Other costs 3,600 5,000 Total costs 18,100 23,200

Profit

1,900

6,800

i. Direct materials, direct labour and maintenance are variable ii. Rent and rates and depreciation are fixed costs iii. Other costs consist of fixed costs of $1,600 plus variable cost of $1 per unit made and sold

You are required to prepare a flexible budget showing the variance for each line item. (25 marks)