Budget Preparation/Mathematics
Budget preparation
Budgeting
As indicated on the VLE
Learning Objectives for Course.
1. Develop quantitative skills necessary to read, interpret and
perform the calculations for the accounting reports involved in cost control and profit planning.
2. Evaluate and identify financial strengths and weaknesses of a business through appropriate conceptual analysis.
3. Analyse information and knowledge effectively in order to develop meaning to solve complex problems and make decisions
Guidelines for assignment This is an individual assignment
Ground your answer in relevant theory
Plagiarism and reproduction of someone else’s work as your own will be penalized
Make use of references, where appropriate – Use Harvard or APA referencing method.
Late submission are not accepted
Structural elements should include an introduction, main body, and a conclusion
Weight – 50%
Word count guidance : question 1 1000, question 2 n/a
Type of assignment: Excel Assessed Work Folder and Business Report
Start / Finish : Week 5 – 6
Learning Outcome Assessed: 3,4
Question 1 – Planning and Control
Write an essay of 1000 words demonstrating your conceptual
understanding of the following questions.
1. Is budgeting used primarily for scorekeeping, attention,
directing or problem solving?
2. How do strategic planning, long range planning and budgeting differ?
3. Why is budgeted performance better than past performance
as a basis for judging actual results?
4. What are the major benefits of budgeting?
5. Is budgeting an unnecessary burden for day to day problems?
Explain your answer.
6. Why is the sales forecast the starting point for budgeting?
7. How do Spreadsheets aid the application of sensitivity analysis?
Question 2 – Budget Preparation – Intellectual and Practical Skills
Application of learning:
Prepare the following budgets for the 6 months ending 30
September 2014. 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 using the information below.
Asian Ltd
Balance Sheet as of 31st March 2014
Fixed Assets £ 200,000
Current Assets
Debtors (Feb £20,000, March £28,000) £ 48,000
Stock: Raw Materials £ 18,000
Finished Goods £ 26,000
£ 92,000
Current Liabilities
Creditors (Feb £16,000, March £20,000) -£ 36,000
Bank -£ 6,000
-£ 42,000
Net Current Asset/Working Capital £ 50,000
Net Assets £ 250,000
Finance by:
Share Captial £ 200,000
Profit and Loss £ 50,000
Total Shareholders Equity £ 250,000
Additional Information:
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:
Direct materials £15
Direct Labour £12
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.