Accounting for Manager

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Submitted By vasudevan
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Individual Assignment 30% (40 marks)

Extract from module learning outcomes. Topic F: Budgeting Understand the process of budget preparation including those relating to cash flow. Upon successful completion of this topic, students should be able to: 1. Describe the purpose of budgeting and budgeting control. 2. Describe the differences between fixed and flexible budgets. 3. Outline the behavioural consequences of a budgetary control system.


Question Spears Limited is engaged in manufacturing of special component (KWQ 12) be used in for calculators. As a step towards reducing uncertainty over the finance needs of the new business, the finance manager has asked you to prepare a cash budget for Spears Ltd for the nine (9) months period from 1 January 2014 till 30 September 2014. You have collected some raw data from the concerned department heads and tabulated them as follows: a) The following are sales for the nine month period are as follows: Estimated Sales Units 250,000 255,000 264,000 290,000 315,000 340,000 365,000 270,000 257,000

Sales Forecast Month January February March April May June July August September

The estimated selling price per special component is $5.00. The collections for the above sales forecast are as follows: i. Collection from customers within the month of sale = 10% ( deemed to be cash sales) ii. Collection from customers following the month of sale = 50% iii. Collection from customers following the second month of sales = 30% iv. 10% of the sales are estimated to become irrecoverable. b) Direct materials are acquired one month prior to production and are paid the following month of purchase. One special component (KWQ 12) uses 2 units of direct materials. The company keeps stock of 25% of the next months estimated sales. Balance of direct materials as at 31 December 2013 amounts to 140,000 units of direct material at $0.25…...

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