QUESTION 4 (20 marks)

A)Prepare the cash budget of ABACUS Inc. for the quarter October to December, based upon the following data and additional information. (14 marks)

Month

Sales ($)

Purchase

($)

Wages

($)

Selling

Overheads

($)

Production

Overheads

($)

July

90,000

30,000

9,000

7,850

5,580

August

93,500

23,000

9,400

9,300

8,820

September

86,000

48,900

9,900

3,610

9,470

October

78,000

34,560

7,000

3,510

6,880

November

78,500

35,980

18,600

3,400

7,000

December

88,600

37,400

8,000

3,250

7,680

Additional Information:

The Cash balance at 1 October is $ 850000

Purchases are 50% in cash and balance are paid the month Following.

Sales are 50% Cash, 40% Received month following and Balance 10% in the monthfollowing the second month.

A plot of land will be purchased and to be paid in October $ 75000.

Wages are paid one month in arrear and all overheads are paid two months in arrear

ABC Ltd is due to repay a loan of $ 8000 in November.

A dividend of $ 80,000 is expected to be paid in November

B)What are the Benefits and Limitations of Budgeting?

QUESTION 5 (20 marks)

1. XY Inc. provides the following data for June 2019 when 13,000 Units are manufactured:

Standard Material Cost (Per Unit)

6.20 kg @ $ 10.25/kg

Actual Material Cost (Per Unit)

6.85 kg @ $ 13.8/kg

Standard Labor cost (Per Unit)

5.5 hrs @ $ 14/hr

Actual Labor cost (Per Unit) 5.30 hrs @ $ 15.2 /hr a) Calculate: (9 marks)

Direct Material Price Variance

Direct Material Quantity/Usage Variance

Total Material Cost Variance

Direct Labor Rate Variance

Direct Labor Efficiency Variance

Total Labor Cost Variance

(b)

Calculate Variable Overhead Spending Variance if actual labor hours used are 360, standard variable overhead rate is $11.40 per direct labor hour and actual variable overhead rate is

$10.30 per direct labor hour. Also specify whether the variance is favorable or unfavorable. (3 marks)

(c)

Calculate the variable overhead efficiency variance using the following figures: (3 marks)

Number of Units Produced

720

Standard Direct Labor Hours Per Unit

1.2

Actual Direct Labor Hours Used

360

Standard Variable Overhead Rate

$11.40

d)"Financial control measures are not Luxury but absolute necessity". Comment.