Question 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 100,000

Current Assets

Debtors (Feb 10000, March 14000) 24,000

Stock Raw Materials 9,000

Finished Goods 13,000

Sum 46,000

Current Liabilities

Creditors (Feb 8000, March 10000) (18,000)

Bank (3,000)

Sum (21,000)

Net Current Assets / Working Capital 25,000

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.