Cost and Management Accounting

Budgeting and Budgetary Control

Part A: Discussion of basic theories and definitions including (a) types of budgets, and (b) steps of preparing a budget.

Part B: 20 Illustrations along with solutions

Part A

What is a Budget?

A budget is a quantitative expression of a plan of action relating to the forthcoming budget period. It represents a written operational plan of the management for the budget period. It is always expressed in terms of money or quantity or both money and quantity. It is the policy to be followed during the budget period for attainment of specified organizational objectives and goals.

CIMA, London, defines budget as, “Financial and/or quantitative statements, prepared prior to a definite period of time, of the policy to be pursued during that period for the purpose of attaining a given objective.” The basic elements of a budget are:

(i) It is a future plan of activity for a specified period of time.

(ii) It is expressed in physical or monetary units or in both.

(iii) It is prepared in advance, i.e., before the period during which it is to operate.

(iv) The objectives to be attained and the policy to be pursued to achieve those objectives are required to be laid down before its preparation.

What is Budgetary Control?

Budgetary control is a system with respect to a business organisation involving the use of budgets and budgetary reports throughout the budget period to coordinate and evaluate and control day-to-day operations in accordance with the goals specified by the budget. Budgetary control also involves a constant checking and evaluation of actual results compared with the budgeted activities leading to identifying the corrective measures wherever necessary. CIMA, London, defines budgetary control as, “The establishment of budgets relating the responsibilities of executives to the requirements of a policy, and the continuous comparison of actual with budgeted results, either to secure by individual action the objective of that policy or to provide a basis for its revision.” The process of budgetary control involves the following steps:

a) Defining and specifying the objectives to be achieved by the business.

b) Preparing business plans in order to ensure that the desired objectives are accomplished.

c) Translating the plans into budgets, and relating the responsibilities of individual executives and managers to particular sections of the budget.

d) Continuous comparison of actual results with the budget, and the calculation of differences between the budgeted and actual performance.

e) Investigating major differences in order to establish the causes.

f) Presentation of the information to management in a suitable form, relating the variances to the responsibilities of individual executives and managers.

g) Corrective actions / measures by the management in order to avoid any wastage or over-expenditure.

h) Revision of the budget, if necessary, where it is not possible to achieve the budgeted targets due to change in circumstances.

Requisites of an effective system of budgetary control

1. A clearly defined organisational structure, which emphasises areas of responsibility.

2. Adequate accounting records and procedures, so that performances of the executives and managers can be measured satisfactorily correctly.

3. Participation by the individuals within the budgeting processes and guidelines.

4. Awareness of the management of the uses of the budgetary control system.

5. Awareness of the top management of the problems of budgetary control system, especially of the reactions of the individuals to the budgetary control system.

6. Flexibility in the budgetary control system, so that plans and objectives may be revised, when it is absolutely required to do so.

Steps in Preparing a Budget

Preparing a budget involves the following steps:

1. Establish budget centres.

2. Prepare a clearly defined organisational chart stating the functional responsibilities of each member of the management team.

3. Prepare a budget manual.

4. Form a budget committee.

5. Determine the limiting or key factor.

6. Select the budget period.

7. Set objectives to be reached by the end of the budget period.

8. Prepare forecasts for the budget period.

9. Determine enterprise policies (e.g. product range, normal working hours per week, channels of distribution, stock levels, investments in research and development, procurement policies, wages payment methods and incentive schemes, promotional policies, etc.)

10. Compute from the forecasts the requirements in terms of the economic quantities needed to meet the objectives while complying with the policies. This results in initial provisional budgets in terms of quantities.

11. Convert these quantities into monetary values. This results in initial provisional budgets in terms of values.

12. Review these initial provisional budgets with respect to the planned objectives and policies, and amend objectives or policies or both repeatedly, if necessary, until the acceptable final budgets emerge.

13. Formally accept the final functional budgets which then become part of the master budget and as such an executive order.

Definitions of some important terms

Budget Centre

A budget centre is a section or department of the organisation identified and separated from the rest of the sections or departments for the purpose of budgetary control. The departmental heads are responsible for fulfilment of all the requirements of the budget policy. Each budget centre should have a separate budget and be subjected to independent comparison with the actuals.

Budget Manual

A budget manual is a set of standardized routines and instructions that large organizations follow in budgeting and reporting. Large and complex organizations rely on such a manual to coordinate budgeting activities across several sections or departments of the organisation. Budget manuals are developed and updated through a budget committee that oversees standards and practices within the organisation's financial units.

CIMA, London, defines a budget manual as,

“A document, schedule or booklet which sets out inter alia, the responsibilities of the persons engaged in the routine of and the forms and records required for budgetary control”.

Budget Committee

In a large concern a budget committee is frequently established. It is a useful device for co-ordinating and reviewing the budget programme. The budget committee should consist of the heads of the various departments and other high-level executives. The budget committee is generally advisory in nature. The principal functions of the budget committee are to:

(i) Formulate guidelines for the preparation of budgets;

(ii) Receive and review all budgets;

(iii) Suggest revisions and amendments;

(iv) Approve original, revised or amended budgets;

(v) Recommend action to improve effectiveness;

(vi) Co-ordinate all activities relating to budgeting.

Limiting Factor

A limiting factor is anything that restricts an organisation's ability to maximise its sales due to constraints in demand or the availability of production resources. In each organisation there is always some limiting factor which governs the scale of its activity. A limiting factor is also known as ‘key factor’ or ‘principal budget factor’. Some examples of limiting factors are:

(a) Production capacity;

(b) Shortage of space;

(d) Shortage of material;

(e) Low market demand;

(f) Shortage of capital.

The limiting factor is of vital importance when the budget is being prepared. Generally, the two most important limiting factors are market demand for the products and production capacity.

Budget Period

A budget period is the period of time for which the budget is prepared and employed. It is necessary at the outset of budget preparation to specify the budget period. Budget periods will vary depending upon the uncertainties involved and the type of business. Long-range budgets are usually concerned with capital expenditure and may span five or more years. Short-term budgets, e.g., the cash budget, may only cover a month. Master budgets which consolidate an organisation’s overall goals are usually prepared on an annual basis mainly to coincide with the financial year of the business. For control purposes it is usual to sub-divide the annual budget into monthly or quarterly budgets.

Master Budget

The outcome of the budgeting process will be the collection of a series of subsidiary or functional budgets into a total or master budget. According to CIMA, London, “The master budget is the summary budget incorporating its component functional budgets.”

The master budget represents the overall plan of operations developed by management for the company, covering a definite period of time, such as a year. It is a formal expression of managerial policies and goals for a specified period broken down in detail with respect to functions and organisational responsibilities.

On completion, the master budget will be submitted to the budget committee together with the subsidiary budgets for approval.

Different Functional Budgets

A functional budget is a budget which relates to a major function of the business. The usual functional budgets are:

1. Sales Budget (in Quantity and Value)

2. Production Budget (in Quantity)

3. Production Cost Budget (in Value)

4. Material Budget (in Quantity and Value)

5. Purchase Budget (in Quantity and Value)

6. Labour Budget (in Quantity and Value)

7. Factory Overhead Budget (in Value)

8. Office & Administrative Overhead Budget (in Value)

9. Selling & Distribution Overhead Budget (in Value)

10. Cash Budget (in Value)

11. Capital Expenditure Budget (in Value)

12. Research and Development Budget (in Value)

Flexible Budget

A flexible budget is a budget which, by recognizing different cost behaviour / pattern, is designed to take care of the changes in the overall cost structure as volume of output changes. In other words, a flexible budget is a budget that is prepared for different levels of activity or capacity utilization or volume of output. If the budgets are prepared in such a way so as to change in accordance with the volume of output, they are called flexible budgets. These are much helpful in comparison with actual because the exact deviations are found for which timely corrective action can be taken. The basic idea of a flexible budget is that there shall be some standard of cost and expenditures. Thus, a budget prepared in a manner to give budgeted costs for any level of activity is known as flexible budget. Such budget is prepared after considering the variable and fixed elements of costs and the changes, which may be expected for each of these elements of costs at various levels of operations. A flexible budget recognises the difference in behaviour between fixed and variable costs in relation to fluctuations in production or sales and is designed to change appropriately with such fluctuations. In flexible budget, data relating to costs and expenditures may progressively be changed in any month in accordance with the actual output level. While preparing flexible budgets, estimates of costs and expenditures on the basis of standards determined are made from minimum to maximum level of operations.

Some important points to be kept in mind while preparing a flexible budget:

1. Fixed costs/expenditures will remain fixed under different activity/production levels up to 100% capacity level;

2. Variable costs/expenditures will vary in proportion with the different activity/production levels;

3. If there are semi-variable costs/expenditures, for example telephone expenses, electricity expenses, power costs, repairing costs, etc. (which may also be called semi-fixed costs/expenditures), these have to be segregated between fixed and variable costs/expenditures using the following steps and formulas:

Steps and formulas for segregating semi-variable expenses between fixed and variable expenses:

a. Variable expenses p.u. =	Increase in total expenses ÷ Increase in activity/production level (units, kgs, tonnes, etc.)
b. Total Fixed expenses =	Total expenses under a chosen activity level – Variable expenses p.u. × Units produced under the chosen activity level

How is a Flexible Budget Prepared?

Preparing a flexible budget involves several steps:

1. Identify Variable and Fixed Costs:

Variable costs change in proportion to the level of activity (e.g., direct materials, direct labour). Fixed costs remain constant regardless of the activity level (e.g., rent, salaries).

2. Determine Activity Levels:

Identify the range of possible activity levels (e.g., low, medium, high).

3. Calculate Budgeted Amounts:

For each activity level, calculate the budgeted amounts for both variable and fixed costs. Variable costs will change based on the activity level, while fixed costs remain constant.

4. Create Budget Schedules:

Develop budget schedules for different activity levels, showing expected revenues and expenses.

Format for Cash Budget

Cash Budget for the period from April to June 2022

Particulars	April	May	June
Particulars	Rs	Rs	Rs
*Receipts:*
Cash Sales
Collection from Debtors
Sale of Assets
Other Receipts
Total (A)
*Payments:*
Cash Purchase
Payment to Creditors
Wages
Overheads
Purchase of Assets
Taxes
Others
Total (B)
*Net Cash Flow (A − B)*
*ADD: Opening Balance*
*Closing Balance*

Part B

Cost and Management Accounting

Budgeting and Budgetary Control

Selected Problems and Solutions

Illustration: 1

From the following figures prepare the raw material purchase budget for January, 2015:

Particulars	Materials
Particulars	A	B	C	D	E	F
Estimated stock on Jan 1 (units)	16,000	6,000	24,000	2,000	14,000	28,000
Estimated stock on Jan 31 (units)	20,000	8,000	28,000	4,000	16,000	32,000
Estimated consumption (units)	1,20,000	44,000	1,32,000	36,000	88,000	1,72,000
Standard price p.u.	25 p.	5 p.	15 p.	10 p.	20 p.	30 p.

Solution: 1

Illustration: 2

A company manufactures product - A and product –B. During the year ending 31st December 2015, it is expected to sell 15,000 kg of product A and 75,000 kg of product B at Rs 30 and Rs 16 per kg respectively. The direct materials P, Q and R are mixed in the proportion of 3: 5: 2 in the manufacture of product A, Materials Q and R are mixed in the proportion of 1: 2 in the manufacture of product B. The actual and budgeted inventories for the year are given below:

	Opening Stock	Expected Closing Stock	Anticipated Cost per kg
	(kg)	(kg)	(Rs)
Material – P	4,000	3,000	12
Material – Q	3,000	6,000	10
Material – R	30,000	9,000	8
Product – A	3,000	1,500	-
Product – B	4,000	4,500	-

Prepare the Production Budget and Materials Budget showing the expenditure on purchase of materials for the year ending 31-12-2015.

Solution: 2

Illustration: 3

The following details apply to an annual budget for a manufacturing company.

Particulars	Quarters
Particulars	1st	2nd	3rd	4^th
Working days	65	60	55	60
Production (units per working day)	100	110	120	105
% of annual R/M Purchases by weight	30%	50%	20%	-
Budgeted purchase price per kg (Rs)	1	1.05	1.125	-

Quantity of raw material required per unit of production is 2 kg. Budgeted closing stock of raw material at the end of the year is 2,000 kg. Budgeted opening stock of raw material at the beginning of the year is 4,000 kg. (Cost Rs 4,000)

Issues are priced on FIFO Basis. Calculate the following budgeted figures.

(a) Quarterly and annual purchase of raw material by weight and value.

(b) Closing quarterly stocks by weight and value.

Solution: 3

Illustration: 4

Prepare a Selling overhead Budget from the estimates given below:

Particulars	(Rs)
Advertisement	1,000
Salaries of the Sales Department	1,000
Expenses of the Sales Department (Fixed)	750
Salesmen’s remuneration	3,000

Salesmen’s Commission: 1% on sales affected

Carriage outwards: estimated @ 5% on sales

Agents’ Commission: 7½% on sales

The sales during the period were estimated as follows:

(a) Rs 80,000 including Agents’ Sales Rs 8,000

(b) Rs 90,000 including Agents’ Sales Rs 10,000

Solution: 4

Illustration: 5

ABC Ltd. a newly started company wishes to prepare a Cash Budget for 6 months from January, 2022. Prepare the cash budget from the following estimated revenue and expenses.

Month	Total Sales (Rs)	Materials (Rs)	Wages (Rs)	Overheads
Month	Total Sales (Rs)	Materials (Rs)	Wages (Rs)	Production (Rs)	S and D (Rs)
January	20,000	20,000	4,000	3,200	800
February	22,000	14,000	4,400	3,300	900
March	28,000	14,000	4,600	3,400	900
April	36,000	22,000	4,600	3,500	1,000
May	30,000	20,000	4,000	3,200	900
June	40,000	25,000	5,000	3,600	1,200

Cash balance on 1st January, 2022 was Rs 10,000. A new machine is to be installed at Rs 20,000 on credit, to be repaid by two equal instalments in March and April. Sales commission @5% on total sales is to be paid within a month following actual sales.

Rs 10,000 being the amount of 2nd call may be received in March. Share premium amounting to Rs 2,000 is also to be received along with the 2nd call. Period of credit allowed by suppliers — 2 months; period of credit allowed to customers — 1 month, delay in payment of overheads 1 month, and delay in payment of wages ½ month. Assume cash sales to be 50% of total sales.

Solution: 5

Illustration: 6

Prepare a Cash Budget for the three months ending 30th June, 2016 from the information given below:

Month	Sales (Rs)	Materials (Rs)	Wages (Rs)	Overheads (Rs)
February	14,000	9,600	3,000	1,700
March	15,000	9,000	3,000	1,900
April	16,000	9,200	3,200	2,000
May	17,000	10,000	3,600	2,200
June	18,000	10,400	4,000	2,300

Credit terms are:

(a) Sales / debtors: 10% sales are on cash, 50% of the credit sales are collected next month and the balance in the following month.

(b) Creditors: Materials 2 months.

(d) Overheads: 1/2 month.

Other relevant information is:

(i) Plant and machinery will be installed in February 2016 at a cost of Rs 96,000. The monthly instalment of Rs 2,000 is payable from April onwards.

(ii) Dividend @ 5% on preference share capital of Rs 2, 00,000 will be paid on 1st June.

(iii) Advance to be received for sale of vehicles Rs 9,000 in June.

(iv) Dividends from investments amounting to Rs 1,000 are expected to be received in June.

(v) Cash and bank balance on 1st April, 2016 is expected to be Rs 6,000.

Solution: 6

Illustration: 7

Draw up a flexible budget for overhead expenses on the basis of the following data and determine the overhead rates at 70%, 80% and 90%:

Plant Capacity: 80% Capacity	(Rs)
A. Variable Overheads:
Indirect labour	12,000
Stores including spares	4,000
Total (A)	16,000
B. Semi-Variable Overheads:
Power (30% - Fixed; 70% - Variable)	20,000
Repairs (60% - Fixed; 40% - Variable)	2,000
Total (B)	22,000
C. Fixed Overheads:
Depreciation	11,000
Insurance	3,000
Salaries	10,000
Total (C)	24,000
Total Overheads (A + B + C)	62,000
Estimated Direct Labour Hours	1,24,000

Solution: 7

Illustration: 8

The profit for the year of Push On Ltd. works out to 12.5% of the capital employed and the relevant figures are as under:

	(Rs)
Sales	5,00,000
Direct Materials	2,50,000
Direct Labour	1,00,000
Variable Overheads	40,000
Capital Employed	4,00,000

The new sales manager who has joined the company recently estimates for the next year a profit of about 23% on capital employed, provided the volume of sales is increased by 10% and simultaneously there is an increase in selling price of 4% and an overall cost reduction in all the elements of cost by 2%.

Find out by computing in detail the cost and profit for next year, whether the proposal of sales manager can be adopted.

Solution: 8

Illustration: 9

The monthly budgets for manufacturing expenses of a concern for two levels of activity were as follows:

Capacity	60%	100%
Budgeted production (units)	600	1,000
	(Rs)	(Rs)
Wages	1,200	2,000
Consumable stores	900	1,500
Maintenance	1,100	1,500
Power and fuel	1,600	2,000
Depreciation	4,000	4,000
Insurance	1,000	1,000
Total	9,800	12,000

You are required to:

(i) Indicate which of the items are fixed, variable and semi-variable stating the reason for such classification in each case;

(ii) Prepare a budget for 80% capacity; and

(iii) Find the total cost, both fixed and variable per unit of output at 60%, 80% and 100% capacity.

Solution: 9

Illustration: 10

X Chemical Ltd. manufacture two products AB and CD by mixing the raw materials in the proportion as shown below:

Raw Material	Product AB	Product CD
A	80%
B	20%
C		50%
D		50%

The finished weight of products AB and CD are equal in the weight of ingredients. During the month of June, it is expected that 60 tons of AB and 200 tons of CD will be sold.

Actual and budgeted inventories for the month of June are as follows:

	Actual Inventory On 1^st June (Tons)	Budgeted Inventory On 30^th June (Tons)
Raw Material A	15	20
Raw Material B	10	40
Raw Material C	200	300
Raw Material D	250	200
Product AB	10	5
Product CD	50	60

The purchase price of materials for June is expected to be as follows:

Material	Cost per ton
	(Rs)
A	500
B	400
C	100
D	200

All materials will be purchased on 3rd of June.

Prepare:

(a) The Production Budget for the month of June,

(b) The Material Requirement budget for the month of June, and

Solution: 10

Illustration: 11

From the following information relating to year 2021 and the conditions expected to be prevailing in year 2022, prepare a budget for the year 2022.

2021 Actuals:	Rs
Sales (40,000 units)	1,00,000
Raw materials	53,000
Wages	11,000
Variable overheads	16,000
Fixed overheads	10,000

2022 Prospects:	Rs
Sales (60,000 units)	1,50,000
Raw materials	5% increase in prices
wages	10% increase in wage rate and 5% increase in productivity

Additional plants costing Rs 37,000 would be purchased in the year 2022 and depreciation would be charged on them @ 10%.

Solution: 11

Illustration: 12

Production costs of a factory for a year are as follows:

Particulars	Rs
Direct wages	80,000
Direct materials	1,20,000
Production overheads (Fixed)	40,000
Production overheads (Variable)	60,000

During the forthcoming year it is anticipated that:

a) The average rate for direct labour remuneration will fall from Rs 0.80 per hour to Rs 0.75 per hour;

b) Production efficiency will be reduced by 5%;

c) Price per unit of direct materials and of other materials and services which comprise overheads will remain unchanged; and

d) Production in the coming year will increase by 33.33%.

Draw up a production cost budget.

Solution: 12

Illustration: 13

With the following data for a 60% activity prepare a budget for production at 80% and 100% capacity.

a) Production at 60% capacity is 300 units;

b) Materials Rs 100 per unit;

c) Labour Rs 40 per unit;

d) Direct expenses Rs 10 per unit;

e) Factory expenses Rs 40,000 (40% fixed); and

f) Administrative expenses Rs 30,000 (60% fixed).

Solution: 13

Illustration: 14

The following information relates to the production activities of Omega Ltd. for 3 months ending on 31.03.2022:

Particulars	Rs
Variable expenses (at 50% capacity):
Materials	6,00,000
Labour	6,40,000
Salesmen’s commission	95,000
Total	13,35,000
Semi-variable expenses (at 50% capacity):
Plant maintenance	62,500
Indirect labour	2,47,500
Salesmen’s salaries	72,500
Sundries	65,000
Total	4,47,500
Fixed expenses:
Management salaries	2,10,000
Rent and taxes	1,40,000
Depreciation of machinery	1,75,000
Sundry office expenses	2,22,500
Total	7,47,500

It is further noted that semi-variable expenses remain constant between 40% and 70% capacity, increase by 10% of the above figures between 70% and 85% capacity and increase by 15% of the above figures between 85% and 100% capacity.

Fixed expenses remain constant whatever the level of activity may be. Sales at 60% capacity are Rs 25, 50,000, at 80% capacity are Rs 34, 00,000 and at 100% capacity is Rs 42, 50,500.

Assuming that all items produced are sold, you are required to prepare a flexible budget at 60%, 80% and 100% capacity.

Solution: 14

Illustration: 15

The following information at 50% capacity is given. Prepare a flexible budget and forecast the profit or loss at 60%, 70% and 90% capacity.

Particulars	Rs
Fixed expenses:
Salaries	50,000
Rent and taxes	40,000
Depreciation	60,000
Administrative expenses	70,000
Total	2,20,000
Variable expenses:
Materials	2,00,000
Labour	2,50,000
Others	40,000
Total	4,90,000
Semi-variable expenses:
Repairs	1,00,000
Indirect labour	1,50,000
Others	90,000
Total	3,40,000
Sales	9,00,000

It is estimated that fixed expenses will remain constant at all capacities. Semi-variable expenses will not change between 45% and 60% capacity, will rise by 10% between 60% and 75% capacity, a further increase of 5% when the capacity crosses by 75%.

Estimated sales:

Capacity	60%	70%	90%
(Rs)	11,00,000	13,00,000	15,00,000

Solution: 15

Illustration: 16

Zee Company Ltd. wishes to arrange overdraft facilities with its bankers from the period August to October 2022 when it will be manufacturing mostly for stock. Prepare a cash budget for the above period from the data given below:

Month	Sales	Purchases	Wages	Manufacturing Expenses	Office Expenses	Selling Expenses
June	1,80,000	1,24,800	12,000	3,000	2,000	2,000
July	1,92,000	1,44,000	14,000	4,000	1,000	4,000
August	1,08,000	2,43,000	11,000	3,000	1,500	2,000
Sept.	1,74,000	2,46,000	12,000	4,500	2,000	5,000
Oct.	1,26,000	2,68,000	15,000	5,000	2,500	4,000
Nov.	1,40,000	2,80,000	17,000	5,500	3,000	4,500
Dec.	1,60,000	3,00,000	18,000	6,000	3,000	5,000

Additional Information:

(a) Cash in hand as on 01.08.2022: Rs 25,000

(b) 50% of credit sales are realised in the month following the month of sale and the remaining 50% in the second month following. Creditors are paid in the month following the month of purchase.

(d) Lag in payment of other expenses is one month.

Solution: 16

Illustration: 17

The Sales Director of a manufacturing company reports that in the New Year, he expects to sell 27,000 units of a certain product. The Production Manager consults the store-keeper and casts his figures as follows:

Two kinds of raw materials, A and B are required for manufacturing the product. Each unit of the product requires 4 units of A and 6 units of B. The estimated opening balances at the commencement of the next year are: Finished Product: 5,000 units, Material A: 24,000 units, and Material B: 30,000 units. The desirable closing balances at the end of the next year are: Finished Product: 7,000 units, Material A: 26,000 units, and Material B: 32,000 units. Draw up a Material Purchase Budget (in units) for the next year.

Solution: 17

Illustration: 18

The following information is given to you. Prepare Selling and Distribution Cost Budget for six months ending 30.09.2022.

(i)	Direct Selling Expenses	10% of Sales
(ii)	Advertising	2% of Sales
(iii)	Distribution Expenses	5% of Sales
(iv)	Sales Office Expenses	North Rs 10,000; South Rs 8,000; East RS 12,000; and West Rs 15,000.
(v)	Sales @ Rs 50 per unit	North 6,100 units; South 3,800 units; East 7,800 units; and West 4,700 units.

Solution: 18

Illustration: 19

Following are the budgeted expenses for production of an electronic component of TV (10,000 units):

Particulars	Rs
Direct materials	50
Direct labour	20
Variable overheads	20
Fixed overheads (Rs 1,00,000)	10
Variable expenses (Direct)	5
Selling expenses (10% fixed)	10
Distribution expenses (20% fixed)	5
Administration expenses (Rs 50,000)	5
Total cost of sale per unit (to make and sell)	125

Prepare a budget for production of (a) 7,000 units and (b) 9,000 units, showing distinctly marginal cost and total cost. Assume that the administration expenses are rigid for all levels of production.

Solution: 19

Illustration: 20

Prepare a purchase budget of A B Co. Ltd. for materials for the year 2022 based on the budgeted materials consumption and the estimated opening and closing stocks of materials as given below:

	Materials (in kg)
	A	B	C	D	E
Stock on 1^st Jan., 22	180	25	90	22	12
Stock on 31^st Dec., 22	200	60	40	20	50
Budgeted Consumption during the period	1,480	175	330	182	92
Purchase price per kg (Rs)	60	60	10	50	25

Solution: 20

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Wednesday, January 26, 2022

Cost and Management Accounting - Budgeting and Budgetary Control