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Budgeting _ Five Questions




Question;Budgeting;Hotel;Dining Room;Conference Centre;Total;Capacity;100 rooms;100 seats;200 seats;Selling price/unit;?75;?35;?40;Material costs/unit;?5 laundry;?15 food;?5 refreshments;Other variable costs/unit;?5 cleaning;?10 labour;?1 light & heat;Produce a budget that shows the;contribution for each of the three services. Rank the three services as to;the greatest contributions to profitability. What are the constraints?;The marketing manager has asked your;advice as to whether to accept EITHER 200 people attending a conference;and staying for dinner in two sittings but with no hotel accommodation;(which will make it very difficult to sell hotel rooms) OR to refuse the;conference booking but to maintain the average 60% hotel occupancy, of;which half use the dining room.;16.2 Jethro Turnbull Ltd is a privately owned;business. It has budgeted for profits (after deducting depreciation of ?35,000);of ?125,000. Debtors are expected to increase by ?20,000, inventory is planned;to increase by ?5,000 and creditors should increase by ?8,000. Capital;expenditure is planned of ?50,000, income tax of ?35,000 has to be paid and;loan repayments are due totalling ?25,000. What is the forecast cash position;of Jethro Turnbull at the end of the budget year, assuming a current bank;overdraft of ?15,000?;16.3 Bridgeport PLC has produced the following;summary profit budget and cash forecast for the next six months. What;assumptions can you make about the business based on these figures? What;questions would you want to ask in relation to the figures?;Profit budget;(in ?'000);Jan;Feb;Mar;Apr;May;Jun;Sales;1000;1000;1000;2000;2000;2000;Cost of sales;400;400;400;800;800;800;Gross profit;600;600;600;1200;1200;1200;Overheads;350;350;350;350;350;350;Net profit;250;250;250;850;850;850;Cash forecast;(in ?'000);Net profit;250;250;250;850;850;850;Capital expenditure;-100;-250;Loan repayment;-400;Cash flow;150;250;250;600;450;850;Budgetary Control;Hunter-gatherer;Ltd produces Widgets. The table below shows the budget and actual units sold;together with standard costs and actual costs for materials and labour used in;the manufacture of Widgets.;Data for July 2008;Budget;Actual;Units of finished Widgets sold;5000;4500;Standard material required;(kg per Widget);1.5;1.7;Actual materials used;(kg per Widget);Standard material costs per kg;?12.50;?13.00;Actual material cost per kg;Standard labour hours required;(hours per Widget);1.2;1.3;Actual labour hours used;(hours per Widget);Standard labour costs per hour;?14.00;?13.90;Actual labour cost per hour;Assume that the;quantity of materials purchased and the quantity used are identical.;Produce a;report that compares the original budget with actual costs for materials;and labour in July.;Produce a;budget versus actual variance report using a flexible budget and calculate;the variances on that basis.;Calculate both usage and price variances for each of;materials and labor.;Explain;why variance analysis using a flexible budget may be helpful for;management control.


Paper#37428 | Written in 18-Jul-2015

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