Question 1

production budget

Accepted Answer

Sales                                              Product 1                               Product 2
Add closing stock
Less opening stock
Total Production Units

Question 2

Raw Materials Purchases Budget

Accepted Answer

Mat X                       Mat Y
Product 1
Product 2
Total
Add closing Stock
Less opening Stock
Forecast 
x Purchase Price
Total Purchase Price

Question 3

Manufacturing Budget

Accepted Answer

Opening Stock of Raw Materials
Mat X
Mat Y
Purchase of Raw

Less closing stock of Raw Materials
Mat X
Mat Y

Labour Costs
Product 1
Product 2
Variable Overhead
Product 1
Product 2
Fixed Overheads

Cost of Manufacture

Question 4

Unit Cost Budget

Accepted Answer

Product 1                         Product 2
Mat X
Mat Y
Labour
Variable
Fixed
Cost Per Unit

To calculate Fixed costs Fixed cost over (Production units1 x Hours1) + (Production units2 x Hours2)

Question 5

Budgeted Trading Account

Accepted Answer

Sales
Less cost of sales
Opening Stock
Production 1
Production 2

Cost of Manufacture

Less Closing Stock
Production 1
Production 2

Gross Profit

Question 6

Explain the term principal budget factor and outline how it may impact production

Accepted Answer

aspect of the business that limits the activity of the firm and prevents the continuous growth of the business. The amount of raw materials available if a firm has difficulty sourcing raw materials this can affect the firm’s ability to produce goods

Question 7

Explain the term uncontrollable cost and give an example

Accepted Answer

Uncontrollable costs are costs over which the manager of a cost centre has no control and therefore, cannot be held responsible for variances in these costs e.g. rates to the local authority are uncontrollable.

Question 8

Explain what is meant by variance analysis.

Accepted Answer

Variance analysis is a technique used in cost and management accounting to compare the actual results achieved with the budgeted figures. It arises when actual expenses are less than budgeted expenses or actual revenue is above the budgeted revenue figure

Question 9

Explain what is meant by a master budget

Accepted Answer

A master budget is a summary of all other budgets e.g. a manufacturing budget

Question 10

Explain three reasons for product costing

Accepted Answer

Establishes the selling price for tendering purposes
Helps with planning and decision making
To find the value of closing stock to be used when calculating profit

Question 11

Why is it important that a business prepares regular budgets?

Accepted Answer

Budgeting is part of the planning process.  It is a financial road map for a business.
Budgeting helps define areas of responsibility for staff and motivates staff to achieve targets,
improves communication and builds teamwork.

Question 12

Define what is meant by a Cash Budget and explain two advantages of a Cash Budget

Accepted Answer

A Cash Budget is a plan or forecast that summarises the expected inflows and outflows of cash
during a period

Question 13

Define what is meant by a Cash Budget and explain two advantages of a Cash Budget

Accepted Answer

A cash budget will anticipate periods when the organization will have cash surpluses and will
enable it to arrange short term investments.

Question 14

Define what is meant by a Cash Budget and explain two advantages of a Cash Budget

Accepted Answer

A cash budget will anticipate periods when the organization will have cash deficits and will
enable it to make arrangements for a loan or overdraft

Question 15

The Principal Budget factor is sales demand in most organisations. State two other
factors that could also be considered to be the Principal Budget factor.

Accepted Answer

Availability of materials
Availability of labour

Question 16

List the components of a master budget for a manufacturing firm

Accepted Answer

Budgeted Manufacturing Account
Budgeted Trading Account and Profit and Loss Account
Budgeted Balance Sheet

Question 17

Explain what is meant by a Capital Budget

Accepted Answer

Capital Budget: This budget deals with any planned capital expenditure e.g. purchase of fixed assets and planned capital receipts such as the sale of the fixed assets.

Accounting

The Budget - Production and Theory

Question	Answer
production budget	Sales Product 1 Product 2 Add closing stock Less opening stock Total Production Units
Raw Materials Purchases Budget	Mat X Mat Y Product 1 Product 2 Total Add closing Stock Less opening Stock Forecast x Purchase Price Total Purchase Price
Manufacturing Budget	Opening Stock of Raw Materials Mat X Mat Y Purchase of Raw Less closing stock of Raw Materials Mat X Mat Y Labour Costs Product 1 Product 2 Variable Overhead Product 1 Product 2 Fixed Overheads Cost of Manufacture
Unit Cost Budget	Product 1 Product 2 Mat X Mat Y Labour Variable Fixed Cost Per Unit To calculate Fixed costs Fixed cost over (Production units1 x Hours1) + (Production units2 x Hours2)
Budgeted Trading Account	Sales Less cost of sales Opening Stock Production 1 Production 2 Cost of Manufacture Less Closing Stock Production 1 Production 2 Gross Profit
Explain the term principal budget factor and outline how it may impact production	aspect of the business that limits the activity of the firm and prevents the continuous growth of the business. The amount of raw materials available if a firm has difficulty sourcing raw materials this can affect the firm’s ability to produce goods
Explain the term uncontrollable cost and give an example	Uncontrollable costs are costs over which the manager of a cost centre has no control and therefore, cannot be held responsible for variances in these costs e.g. rates to the local authority are uncontrollable.
Explain what is meant by variance analysis.	Variance analysis is a technique used in cost and management accounting to compare the actual results achieved with the budgeted figures. It arises when actual expenses are less than budgeted expenses or actual revenue is above the budgeted revenue figure
Explain what is meant by a master budget	A master budget is a summary of all other budgets e.g. a manufacturing budget
Explain three reasons for product costing	Establishes the selling price for tendering purposes Helps with planning and decision making To find the value of closing stock to be used when calculating profit
Why is it important that a business prepares regular budgets?	Budgeting is part of the planning process. It is a financial road map for a business. Budgeting helps define areas of responsibility for staff and motivates staff to achieve targets, improves communication and builds teamwork.
Define what is meant by a Cash Budget and explain two advantages of a Cash Budget	A Cash Budget is a plan or forecast that summarises the expected inflows and outflows of cash during a period
Define what is meant by a Cash Budget and explain two advantages of a Cash Budget	A cash budget will anticipate periods when the organization will have cash surpluses and will enable it to arrange short term investments.
Define what is meant by a Cash Budget and explain two advantages of a Cash Budget	A cash budget will anticipate periods when the organization will have cash deficits and will enable it to make arrangements for a loan or overdraft
The Principal Budget factor is sales demand in most organisations. State two other factors that could also be considered to be the Principal Budget factor.	Availability of materials Availability of labour
List the components of a master budget for a manufacturing firm	Budgeted Manufacturing Account Budgeted Trading Account and Profit and Loss Account Budgeted Balance Sheet
Explain what is meant by a Capital Budget	Capital Budget: This budget deals with any planned capital expenditure e.g. purchase of fixed assets and planned capital receipts such as the sale of the fixed assets.

"Know" box contains:
Time elapsed:
Retries: