Question No 1

A Company wants to prepare cash budget based on the following information. Forecast the cash

position for the months of October, November and December. Complete company's estimate.

Sales (Rs.) Purchases (Rs.) Salaries (Rs.) Other expenses (Rs.)

August 440000 168000 20000 11000

September 260000 520000 74000 16000

October 160000 304000 56000 12000

November 232000 412000 50000 24000

December 172000 320000 56000 12000

Additional Information:

Sales: 40% realized in the month of sales, discount on sales 3% in the same month. Balance

realized equally in two subsequent months by calculating on gross sales.

Accounts receivable consists of Rs. 100000, company receives 60% in October, and balance

received equally in last two months.

Company paid against Purchases in the month following the month of purchases.

30% of the salaries paid in the month of occurrence and remaining is paid in following month.

Other expenses paid in the month of occurrence.

Rent: Rs 1,000 per month paid quarterly in advance in current year during the month of

December.

Income-tax; Installment of advance tax of next year Rs 35,000 due on 15th December.

Cash in hand: Rs 5,000 on September 30.

Company arranges financing in case of deficit, if deficit is below Rs. 200000, company takes

loan from bank, if more than Rs. 200000, company issues shares.

Loan installment is due during November at Rs. 8000.

Question No 2

A Chemical manufacturing company has budgeted capacity of 10000 direct labor hours per

month that is used to calculate predetermined factory overhead rate. At this capacity, company'

budgeted fixed factory overhead is Rs. 75000 with variable overhead rate at Rs. 5 per labor hour.

During the month, labor worked for 12000 hours. However, company uses standard cost system

and labor work for 3 hours to produce one unit when company operates at standard. Company

produces 3000 units during the month. Company's actual factory overheads are Rs. 230000.

Required: Calculate two factory overhead and three factory overhead variances.

Question No 3

a. When should inventory be ordered to avoid from stock shortage? Discuss with practical

example. Same examples will be marked zero.

b. From the book of records of Zaria Arts, it is found that the average daily requirement of

20 x 30 - 90 grams art paper are 100 reams, the maximum weekly requirements of art

paper do not exceed 900 reams and minimum weekly requirements during any week of 6

working days are not likely to fall below 300 reams. The time required to receive supplies

is 4 days with minimum time period of 3 days in normal situations. Company has to pay

Rs. 10 every time an order is placed. Interest on average inventory is 5% with carrying

cost of 7%. Company purchases one ream at Rs. 50. However, in case of emergency, it

takes 2 days to receive supplies. Company requires 35000 reams on annual basis.

Required: Calculate maximum and minimum levels, average maximum level and danger

level.

Question No 4

GH Bros. is engaged in manufacturing cosmetic products and prepared the following information

as a basis for its 2019 Budget.

Products Expected sales Sale price per unit Per unit material required for use in

production of units sold

Material A Material B

X 160000 units Rs. 250 1 kg 2 kg

Y 80000 units 150 2 kg 1.5 kg

Z 200000 units 100 0.5 kg NIL

Estimated inventories at the beginning and desired quantities at the end of 2019 are:

Material Beginning Ending Price per kg (same

price for material

required for use in

production)

A 20000 kg 24000 kg Rs. 40

B 24000 kg 30000 kg 20

Products Beginning Ending

X 10000 units 12000 units

Y 8000 units 4000 units

Z 20000 units 16000 units

Sales information according to cities

X Y Z

Rawalpindi 20% 40% 50%

Islamabad 50% 40% 20%

Lahore 30% 10% Remaining

Required: Prepare sales budget, production budget, also calculate cost of raw material

purchased by preparing raw material budget.