Production Budget, Sales Budget, Procurement Budget, Selling Overheads Budget, Cash Budget, Flexible Budget, Master Budget

1. Ms. K. KALAI SELVI
Assistant Professor of Commerce
PG & Research Department of Commerce
Bon Secours College for Women, Thanjavur

2. Budgetary Control

3. Production Budget
Sum No. 3

4. Answer for Sum No. 3
Bajaj Ltd. Production Budget
(for 6 months ending 30th
June)
Particulars R
(Units)
S
(Units)
T
(Units)
Total
(Units)
Budgeted Sales
Add: Closing Stock
60,000
10,000
50,000
8,000
80,000
14,000
1,90,000
32,000
Less: Opening Stock
70,000
8,000
58,000
9,000
94,000
12,000
2,22,000
29,000
Production (Net)
Add: Loss in Production
62,000
2,583
49,000
1,000
82,000
5,234
1,93,000
8,817
Production (Gross) 64,583 50,000 87,234 2,01,817
Workings: (1)
R - 4%
Total Production (Gross) = 100
Less : Normal Loss = 4
------
Net Production = 96
------

5. If Net Production is 96 means = 62,000 Units
Gross Production is 100 = ?
= 100 / 96 x 62,000
= 64,583 Units
Workings: (2)
S – 2 %
Total Production (Gross) = 100
Less : Normal Loss = 2
------
Net Production = 98
-----
If Net Production is 98 means = 49,000 Units
Gross Production is 100 = ?
= 100 / 98 x 49,000
= 50,000 Units

6. Workings: (3)
T – 6%
Total Production (Gross) = 100
Less : Normal Loss = 6
------
Net Production = 94
------
If Net Production is 94 means = 82,000 Units
Gross Production is 100 = ?
= 100 / 94 x 82,000
= 87,234 Units

7. Sum No. 4
Answer for Sum No.4
Production Budget
Particulars Jan.
(Units)
Feb.
(Units)
Mar.
(Units)
April
(Units)
May
(Units)
June
(Units)
Total
Product A
Sales
Add: Closing Stock
(half the sales for
1,000
600
1,200
800
1,600
1,000
2,000
1,200
2,400
1,200
2,400
1,000
10,600
5,800

8. next month)
Less: Opening Stock
(Previous Month
Closing stock is the
opening Stock for
the current month)
1,600
500
2,000
600
2,600
800
3,200
1,000
3,600
1,200
3,400
1,200
16,400
5,300
Budgeted
Production
1,100 1,400 1,800 2,200 2,400 2,200 11,100
Total Budgeted Production for six month = 11,100 Units
Production Budget
Particulars Jan.
(Units)
Feb.
(Units)
Mar.
(Units)
April
(Units)
May
(Units)
June
(Units)
Total
Product B
Sales
Add: Closing Stock
(half the sales for
next month)
2,800
1,400
2,800
1,200
2,400
1,000
2,000
800
1,600
800
1,600
900
13,200
6,100
4,200 4,000 3,400 2,800 2,400 2,500 19,300

9. Less: Opening Stock
(Previous Month
Closing stock is the
opening Stock for
the current month)
1,400 1,400 1,200 1,000 800 800 6,600
Budgeted
Production
2,800 2,600 2,200 1,800 1,600 1,700 12,700
Total Budgeted Production for six month = 12,700 Units
Summarised Production Cost Budget
Particulars
Product A
Output 11,100 Units
Product B
Output 12,700 Units
Total
Per Unit
Rs.
Amount
Rs.
Per Unit
Rs.
Amount
Rs. Rs.
Direct Material
Direct Labour
10.00
5.00
1,11,000
55,500
15.00
10.00
1,90,500
1,27,000
3,01,500
1,82,500
Prime Cost
Factory Overheads
15.00
4.00
1,66,500
44,400
25.00
3.00
3,17,500
38,100
4,84,000
82,500
Total Cost 19.00 2,10,900 28.00 3,55,600 5,66,500

10. Workings :
Factory Overheads per unit = Annual Overhead / Annual Output
(i) Product A
Annual Overhead = Rs.88,000
Annual Output = 22,000 Units
Per Unit Cost = 88,000 / 22,000
= Rs.4
(i) Product B
Annual Overhead = Rs.72,000
Annual Output = 24,000 Units
Per Unit Cost = 72,000 / 24,000
= Rs.3

11. Purchase Budget
Sum No.5

12. (Answer for Sum No.5)
Production Budget ( Units )
Estimated Sales
Add: Desired Closing Stock
Less : Opening Stock
50,000
14,000
64,000
10,000
Estimated Production 54,000
Materials Purchase or Procurement Budget (Units)
Particulars Material A Material B
Estimated Consumption
[Material A (2 Units x 54,000 Units)]
[Material B (3 Units x 54,000 Units)]
Add : Desired Closing Stock
1,08,000
13,000
1,62,000
16,000
Less : Opening Stock
1,21,000
12,000
1,78,000
15,000
Estimated Purchase 1,09,000 1,63,000

13. Sum No.6

14. (Answer for Sum No.6)
Production Budget ( in Units )
Estimated Sales
Add: Desired Closing Stock
Less : Opening Stock
40,000
7,000
47,000
5,000
Estimated Production 42,000
Materials Purchase or Procurement Budget (in Units)
Particulars Material A Material B
Estimated Consumption
[Material A (3 Units x 42,000 Units)]
[Material B (5 Units x 42,000 Units)]
Add : Desired Closing Stock
Add : Material on Order
1,26,000
15,000
8,000
2,10,000
25,000
10,000
Less : Opening Stock
Less : Material on Order
1,49,000
12,000
1,37,000
7,000
2,45,000
20,000
2,25,000
11,000
Estimated Purchase 1,30,000 2,14,000

15. Sales Budget
Sum No.7

16. ( Answer for Sum No.7)
Workings :
(i) Hero
Department I = 3,00,000
Department II increase by 20% -5,62,500 x 20 / 100 = 1,12,500 Hence 5,62,500 + 1,12,500 = 6,75,000
Department III = 1,80,000
(ii) Zero
Department I will increase by 1,75,000 Hence 4,00,000 + 1,75,000 = 5,75,000
Department II increase by 20% -6,00,000 x 20 / 100 = 1,20,000 Hence 6,00,000 + 1,20,000 = 7,20,000
Department III will be enable to increase the sale by 50,000 Hence 20,000 + 50,000 = 70,000
Sales Budget for the year 2009
Particulars
Hero Zero
Total
Selling Price Rs.3 Selling Price Rs.1.20
Quantity Rs. Quantity Rs. Rs.
Department I
Department II
Department III
3,00,000
6,75,000
1,80,000
9,00,000
20,25,000
5,40,000
5,75,000
7,20,000
70,000
6,90,000
8,64,000
84,000
15,90,000
28,89,000
6,24,000
Total 11,55,000 34,65,000 13,65,000 16,38,000 51,03,000

17. Sum No.8

18. Workings : (i) Reducing the selling price by 10 %
Selling Price = Rs.10 X 10 %
= 10 x 10/100 = Rs.1
= Rs.10 – 1
= Rs.9
(ii) the sale of product X in the first quarter will increase by 20%
January = 10,000 X 20 %
= 10,000 X 20 / 100 = 2,000
= 10,000 + 2000 = 12,000 Units
February = 8,000 X 20 %
= 8,000 X 20 / 100 = 1,600
= 8,000 + 1,600 = 9,600 Units
March = 12,000 X 20 %
= 12,000 X 20 / 100 = 2,400
= 12,000 + 2,400 = 14,400 Units

19. Kailash Bros. Sales Budget for the First Quarter 2008
Particulars January February March Total
Sales (Units) 12,000 9,600 14,400 36,000
Sales (Value)
(Rs.10 – 10 % = Rs.9)
Less: 3%
(allowance + Bad Debts)
1,08,000
3,240
86,400
2,592
1,29,600
3,888
3,24,000
9,720
Net Sales 1,04,760 83,808 1,25,712 3,14,280

20. Sales Budget
Sum No.9
(Answer for Sum No.9)
Workings :
Sales - 1,50,000 Units
Per unit Cost – Rs. 10

21. Sales Value = Rs.15,00,000
Cost of Unit - Rs. 6 ( Variable Cost Rs.4 Fixed Cost – Rs.2 )
Workings
If discount will increased from 30% to 35% ; Sales volume will increase 20%
Actual Sales - 1,50,000
= 1,50,000 X 20%
=1,80,000
Comparative Statement
Particulars 30% Discount
(1,50,000 Units)
Rs.
35% Discount
(1,80,000 Units)
Rs.
Gross Sales
Less : Discount
15,00,000
4,50,000
18,00,000
6,30,000
Net Sales 10,50,000 11,70,000
Variable Cost (Rs.4)
Fixed Cost (Rs.2)
6,00,000
3,00,000
7,20,000
3,00,000
Total Costs 9,00,000 10,20,000
Profit
(Net Sales – Total Costs) 1,50,000 1,50,000

22. Suggestion
Both the alternatives are equally beneficial to the company. The Producer can opt any one of the discount policy for
his sales .

23. Sum No.10

24. Workings
(i) Alpha Budgeted increase of 40% on 2006 Budget
2006 Budget – 25,000 Units
25,000 x 40% = 10,000 Units
----------
35,000 Units
Further increase in Sales due to Advertisement 5,000 Units
Alpha 25,000 Beta 15,000
5 : 3
Alpha - 5,000 X 5 / 8 = 3,125
Beta - 5,000 X 3 / 8 = 1,875
Alpha = 35,000 Units + 3,125 Units = 38,125 Units
(ii) Beta Budgeted increase of 10% on 2006 Budget
Beta 15,000 10 %

25. = 1,500 Units
= 15,000 + 1,500 = 16,500 Units
Further increase in Sales due to Advertisement 5,000 Units
Alpha 25,000 Beta 15,000
5 : 3
Beta - 5,000 X 3 / 8 = 1,875
=16,500 + 1,875= 18,375 Units
Workings
South Zone
(iii) Alpha Budgeted increase of 12% on 2006 Budget
Alpha = 24,000 Units x 12%
= 2,880 Units
-------------
26,880 Units

26. (iv) Beta Budgeted increase of 15% on 2006 Budget
= 30,000 x 15 %
= 4,500
= 34,500 Units
Gopi & Co. Ltd. Sales Budget for the year 2007
Division Product
Budget for 2007
Qty Price Value
North Alpha
Beta
38,125
18,375
10
5
3,81,250
91,875
Total (A) 56,500 4,73,125
South Alpha
Beta
26,880
34,500
10
5
2,68,800
1,72,500
Total (B) 61,380 4,41,300
Total (A)
Total (B)
56,500
61,380
4,73,125
4,41,300
Grand Total 1,17,880 9,14,425

27. Sum No.11

28. (Answer for Sum No.11)
Selling Overhead Budget
Particulars I
Rs.
II
Rs.
III
Rs.
Estimated Sales 80,000 90,000 1,00,000
Fixed Overheads
Advertisement
Salaries of Sales Dept.
Expenses of Sales Dept.
Salesmen’s Remuneration:
Salaries and D.A.
1,000
1,000
750
3,000
1,000
1,000
750
3,000
1,000
1,000
750
3,000
Variable Overheads
Salesmen’s Commission
Carriage Outward 5% on sales
Agent’s Commission
5,750
720
4,000
520
5,750
800
4,500
650
5,750
895
5,000
682
10,990 11,700 12,328

29. Sum No.12

30. (Answer for Sum No.12)
Selling Overhead Budget
Particulars I
Rs.
II
Rs.
III
Rs.
Counter Sales
Travelling Salesman’s Sales
80,000
10,000
1,20,000
15,000
1,40,000
20,000
Total Sales 90,000 1,35,000 1,60,000
Sales Overheads:
Commission on Counter Sales @ 1%
Travelling Salesman’s commission @ 10%
on Travelling Salesman’s Sales
Exp. On Trav. Salesman’s Sales @ 5%
Advertisement
Salaries of Sales Dept.
Expenses of Sales Dept.
Counter Salesmen’s Salaries and D.A.
800
1,000
500
2,500
5,000
1,500
6,000
1,200
1,500
750
2,500
5,000
1,500
6,000
1,400
2,000
1,000
2,500
5,000
1,500
6,000
Total Sales Overheads 17,300 18,450 19,400

31. Cash Budget
Sum No.13
(Answer for Sum No.13)
Workings : 1

32. Particulars April May June July August
Expected Sales
April Rs. 2,00,000
Cash Sales 50%
Credit Sales 50%
(credit allowed to 2 months)
May Rs. 2,20,000
Cash Sales 50%
Credit Sales 50%
(credit allowed to 2 months)
June Rs. 1,90,000
Cash Sales 50%
Credit Sales 50%
(credit allowed to 2 months)
1,00,000
1,10,000
1,00,000
95,000
1,10,000
95,000
Total 1,00,000 1,10,000 1,95,000 1,10,000 95,000
Workings : 2
Particulars May June July
Estimated Purchase
May Rs.1,20,000
Cash Purchase 40%
Credit Purchase 60%
(payable to next month)
June Rs.1,10,000
Cash Purchase 40%
Credit Purchase 60%
(payable to next month)
48,000
72,000
44,000
66,000
Total 48,000 1,16,000 66,000

33. Workings : 3
Particulars May June July
Payment of Overhead
May Rs. 12,000
(Time lag in payment is ½ month)
June Rs. 11,000
(Time lag in payment is ½ month)
6,000 6,000
5,500 5,500
Total 6,000 11,500 5,500
Cash Budget for the month of June 2008
Particulars Rs. Rs.
Opening Balance
Add: Receipts
Cash Sales
Debtors
Interest on Investments
Less : Payments
Cash Purchase
Creditors
Rent
Overheads
95,000
1,00,000
3,000
44,000
72,000
2,000
11,500
42,500
1,98,000
2,40,500
1,29,500
Closing Balance 1,11,000

34. Sum No.14
(Answer for Sum No.14)
Workings: 1

35. February March April May June July August
Credit Sales
(50% of credit sales are realised in the month
following the sales and the remaining 50% in the
second month following)
February 2008 - 1,80,000
March 1,92,000
April 1,08,000
May 1,74,000
June 1,26,000
90,000 90,000
96,000 96,000
54,000 54,000
87,000 87,000
63,000 63,000
Workings: 2
February March April May June July
Purchase
(Creditors are paid in the month
following the month of purchase)
February 2008 - 1,24,800
March 1,44,000
April 2,43,000
May 2,46,000
June 2,68,000
1,24,800
1,44,000
2,43,000
2,46,000
2,68,000
Workings: 3

36. February March April May June July
Wages
(Lag in payment of wages 1 month)
February 2008 - 12,000
March 14,000
April 11,000
May 10,000
June 15,000
12,000
14,000
11,000
10,000
15,000
BPL Ltd.Cash Budget for 3 months ending June 2008
Particulars April
Rs.
May
Rs.
June
Rs.
Opening Balance
Add : Receipts
Realisation from Debtors
25,000
90,000
96,000
53,000
96,000
54,000
-
54,000
87,000
Less : Payments
Purchase
Wages
2,11,000
1,44,000
14,000
2,03,000
2,43,000
11,000
1,41,000
2,46,000
10,000
(Surplus or Deficit)
Estimated overdraft (assumed)
53,000 (-51,000)
Deficit
51,000
(-1,15,000)
Deficit
1,15,000
Closing Balance 53,000 - -

37. Flexible Budget
Sum No.15

38. Workings :
Variable Overheads:
(i) Indirect Labours 80% - 12,000
70% - ?
= 70 / 80 X 12,000 = 10,500
90% - ?
= 90 / 80 X 12,000 = 13,500
(ii) Stores Including Spares 80% - 4,000
70% - ?
= 70 / 80 X 4,000= 3,500
90% - ?
= 90 / 80 X 4,000= 4,500
Semi - Variable Overheads:

39. (i) Power (30% Fixed, 70% Variable) - 20,000 (for 80% Plant Capacity)
Fixed (30%) - 20,000 x 30 / 100 = 6,000
Variable (70%) - 20,000 x 70 / 100 = 14,000
(for 70% Plant Capacity)
Fixed - 6,000
Variable - 80% Plant Capacity = 14,000
70% - ?
= 14,000 x 70 / 80 = 12,250
(for 90% Plant Capacity)
Fixed - 6,000
Variable - 80% Plant Capacity = 14,000
90% - ?
= 14,000 x 90 / 80 = 15,750

40. (ii) Repairs and Maintenance (60% Fixed, 40% Variable) - 2,000 (for 80% Plant Capacity)
Fixed (60%) - 2,000 x 60 / 100 = 1,200
Variable (40%) - 2,000 x 40 / 100 = 800
(for 70% Plant Capacity)
Fixed - 1,200
Variable - 80% Plant Capacity = 800
70% - ?
= 800 x 70 / 80 = 700
(for 90% Plant Capacity)
Variable - 80% Plant Capacity = 800
90% - ?
= 800 x 90 / 80 = 900

41. Flexible Budget
Particulars At 70% Capacity
Rs.
At 80% Capacity
Rs.
At 90% Capacity
Rs.
Variable Overheads:
Indirect Labours
Stores Including Spares
Semi - Variable Overheads
Power – Fixed
Variable
Repairs and Maintenance
Fixed
Variable
Fixed Overheads
Depreciation
Insurance
Salaries
10,500
3,500
6,000
12,250
1,200
700
11,000
3,000
10,000
12,000
4,000
6,000
14,000
1,200
800
11,000
3,000
10,000
13,500
4,500
6,000
15,750
1,200
900
11,000
3,000
10,000
Total Overheads 58,150 62,000 65,850
Estimated Direct Labour Hours 1,08,500 1,24,000 1,39,500
Direct Labour Hour Rate 0.536 0.500 0.472

42. Workings :
At 70% Capacity = 58,150 / 1,08,500 = Rs. 0.536
At 80% Capacity = 62,000/ 1,24,000 = Rs. 0.500
At 90% Capacity = 65,850 / 1,39,500 = Rs. 0.472

43. Sum No.16

44. Workings:
Selling Expenses : 10 % Fixed = Rs.13 X 10 /100 = Rs.1.30 90 %Variable = Rs.13 X 90 x 100 = Rs.11.70
Distribution Expenses Fixed 20% = Rs.7 X 20 /100 = 1.40 Variable 80 % = Rs. 7 x 80 /100 = 5.60
Flexible Budget
Particulars 10,000 Units 8,000 Units 6,000 Units
Per
Unit
Total
Amount
Per
Unit
Total
Amount
Per Unit Total
Amount
Material
Labour
Overheads
Variable
Fixed
Direct Variable Expenses
Selling Expenses
Fixed
Variable
Distribution Expenses
Fixed 20%
Variable 80%
Administration Expenses
70.00
25.00
20.00
10.00
5.00
1.30
11.70
1.40
5.60
5.00
7,00,000
2,50,000
2,00,000
1,00,000
50,000
13,000
1,17,000
14,000
56,000
50,000
70.00
25.00
20.00
12.50
5.00
1.625
11.70
1.75
5.60
6.25
5,60,000
2,00,000
1,60,000
1,00,000
40,000
13,000
93,600
14,000
44,800
50,000
70.00
25.00
20.00
16.667
5.00
2.167
11.70
2.334
5.60
8.333
4,20,000
1,50,000
1,20,000
1,00,000
30,000
13,000
70,200
14,000
33,600
50,000
Total 155.00 15,50,000 159.425 12,75,400 168.801 10,00,800

45. Master Budget
Sum No.17

46. Master Budget
Particulars Rs. Rs.
Sales
Toughened Glass
Bent Toughened Glass
3,00,000
5,00,000
Less: Cost of Production
Direct Materials (60% of Sales)
Direct wages (20 x Rs.150 x 12 months)
4,80,000
36,000
8,00,000
Prime Cost 5,16,000
Factory Overheads
Indirect Labour:
Work Manager’s salary (Rs.500 x 12 months)
Foremen Salary (Rs.400 x 12 months)
Stores and spares (2 ½ % on sales)
Depreciation
Light and Power
Sundries (10% on Direct Wages)
Repairs and maintenance
6,000
4,800
20,000
12,600
5,000
3,600
8,000
Work Cost 5,76,000
Gross Profit
Less: Administration, Selling & Distribution Overheads
2,24,000
14,000
Net Profit 2,10,000