The Accounts of the Sage 2008
Essay title: The Accounts of the Sage 2008
Candidates should answer THREE questions
Students should answer any THREE questions
1.The following information relates to forecasts of activity for Lake plc.:
Sales
Materials
Wages
Expenses
August
3,000
1,200
September
3,000
1,200
October
3,200
1,300
November
3,400
1,400
December
3,400
1,400
Notes
(1) Half of sales are on credit and customers are allowed one month in which to pay.
(2) Wages are paid as they fall due. Suppliers of materials and expenses allow one month’s credit.
(3) A payment of Ј3,500,000 for new fixed assets is to be made in November.
(4) The proceeds from the sale of land, amounting to Ј2,000,000, is to be received in December.
(5) The expected cash balance at 1st. August is Ј750,000.
(6) Lake plc. does not have a bank overdraft facility at present.
Required:
[a] Prepare a cash budget for the FOUR months to 31st. December (by month and in total). (60%)
[b] Discuss the significant features in the cash budget which you have calculated for Lake plc. (40%)
2.The following budget report has been prepared for the Canterford division of a large group of companies:
Canterford Division
Budget Report for July
Budget
Actual
Variance
Sales (units)
500,000
525,000
Sales
50,000
53,000
3,000 (F)
Direct Materials
15,000
16,000
1,000(A)
Direct Labour
8,000
8,500
500(A)
Production Overheads
4,000
5,000
1,000(A)
Selling & Distribution Overheads
1,200
1,300
100(A)
Administration Overheads
50(A)
Absorbed Group Overheads
2,000
2,500
500(A)
Total Cost
31,000
34,150
3,150(A)
Net Profit
19,000
18,850
150(A)
On investigation, you find that :
Direct materials and labour are entirely variable.
Production overheads are half variable costs and half fixed costs at the budgeted level of sales.
Selling and distribution overheads are 25% variable costs and 75% fixed costs at the budgeted level of sales.
Administration overheads are entirely fixed costs .
Required:
[a] Produce a budget report for the Canterford division for the month of July in a form more useful to management. (50%)
[b] Comment briefly on the budget report. which you have produced for the Canterford division. (20%)
[c] ‘Responsibility accounting is the