The Trial Balance of JBC Limited, a company which sells on-line items, as at 31 July 2022, is given below:

	£	£
Provision for doubtful debts		1,200
Salaries and wages	82,300
Inventory at 1 August 2021	34,620
Dividend paid	1,500
Purchases	362,118
Sales		615,753
Administrative expenses	36,580
Distribution costs	18,115
Land at cost	315,000
Motor vehicles at cost	32,860
Motor vehicles accumulated depreciation at 1 August 2021		17,450
£1 Ordinary Shares		260,000
Retained Earnings		48,190
Buildings at cost	125,000
Buildings accumulated depreciation at 1 August 2021		18,380
Bank	17,350
Share Premium		6,300
5% Loan notes		90,000
Loan note interest	2,000
Trade Receivables	60,340
Trade Payables		30,510
	1,087,783	1,087,783

The following information should also be taken into account:

Motor Vehicles are depreciated at 20% per annum using the reducing balance method

Buildings are to be depreciated at 3% per annum using the straight-line method. 

The closing inventory was valued at £46,740. 

Corporation tax on profits for the year was estimated at £13,450. 

Administrative expenses accrued were £2,500.

A customer who owed £4,800 has gone bankrupt and the company has decided to treat the amount as a bad debt. 

Distribution costs prepaid amounted to £1,230. 

The provision for doubtful debts is to be adjusted so as to represent 6% of the trade receivables.

 

Create the following statements for JBC Limited:

1. Statement of profit or loss for the year ended 31 July 2022                              
2. Statement of Financial Position as at 31 July 2022

                                                                                                                     
 

Question 12

MDG Ltd makes a standard model of headsets, which it sells to retailers for £60 each. Next year the business plans to make and sell 20,000 headsets. The business's costs are as follows:

Manufacturing
Variable materials	£20 per headset
Variable labour	£14 per headset
Other variable costs	£12 per headset
Fixed cost	£80,000 per year
Administration and selling
Variable	£3 per headset
Fixed	£60,000 per year

The management of MDG Ltd has little knowledge about management accounting and 

1. What is meant by the Break-even point (BEP) for an activity? How is it calculated? Explain why MDG Ltd should know the BEP.
2. Calculate the BEP for next year, expressed both in quantity of headsets and sales value.
3. Calculate the level of activity (headsets) that is required to generate a profit of £40,000.
4. Calculate the margin of safety for next year, expressed both in quantity of headsets and sales value.
5. Compare and contrast the incremental budgetary approach to the zero-base budgeting approach to budgeting.

Question 13

STV is a building supplies company that sells products to trade and private customers.

Budget data for each of the six months to March are given below:

		Oct £000	Nov £000	Dec £000	Jan £000	Feb £000	Mar £000
Credit sales		300	300	300	310	310	310
Cash sales		60	60	65	75	80	90
Credit purchases		220	230	230	250	250	250
Other operating costs (excluding depreciation)		80	80	90	120	123	125

Eighty per cent of the value of credit sales is received in the month after sale, 10 per cent two months after sale and 8 per cent three months after sale. The balance is written off as a bad debt.

Seventy-five per cent of the value of credit purchases is paid in the month after purchase, and the remaining 25 per cent is paid two months after purchase.

All other operating costs are paid in the month they are incurred.

STV has placed an order for four new forklift trucks that will cost £27,500 each. The scheduled payment date is in February. The cash balance at 1 January is estimated to be £25,0O0.  

 

Do a cash budget for each of the THREE months of January, February and March.