1. Cost & Management Accounting
Lecture-39

2. Question
Data relating to the months of February to June is available. Prepare the cash budget for the month of April to June.
Months
Sales
Purchases
Wages
February
18,000
12,480
1,200
March
19,200
14,400
1,400
April
10,800
24,300
1,100
May
17,400
24,600
1,000
June
12,500
26,800
1,500
First All columns will appear
Than months one by one
Than Sales with one by one value
Than purchases with one by one value
Than wages with one by one value

3. Question a). 40% cash sales.
b). 50% of credit sales is realized in the month following the sales and the remaining 50% in the second month following.
c). Creditors are paid in the month following the moth of purchase.
d). Cash at bank on the 1st April is Rs. 2,500.

4. Solution Months Particulars April May June
Opening Balance
Add Receipts
Sales
2,500
15,480
2,480
15,960
13,460
Total (1)
17,980
18,440
Less Payments
Purchases
Wages
14,400
1,100
24,300
1,000
24,600
1,500
Total (2)
(15,500)
(25,300)
(26,100)
Closing Balance (1-2)
(6,680)
(12,640)
Bank O/D
6,860
12,640
First Months one by one will appear
Second Opening stock will appear without amounts
Third 2500
Fourth Receipts with out amount
Fifth Sales by one by one amount
Than total 1 with amounts one by one
Than payment will appear with one by one
Than total 2 by value by value
Than closing balance
Than bank OD
Than Total bank od
Total Bank O/D = 6, ,640 = 19,500

5. Working Months Sales April May June Feb 18,000 5,400 --- Mar 19,200
5,760
Apr
10,800
4,320
3,240
17,400
6,960
5,220
12,500
5,000
Total
15,480
15,960
13,460
First month column
Than sales column
Third 4320
Fourth 6960
Fifth 5000
Sixth 3240
seventh 3240
Eighth 5220
Than last total

6. Capacity Levels Theoretical capacity Normal or Estimated capacity
Actual capacity

7. Flexible or Flex Budget
1. Prepare original budget based on estimated / normal capacity level.
2. Estimate flex budget at actual capacity level.
3. Compare the actual cost with flexible budgets and report variances to the management.

8. Normal capacity level 2,000 units
Original budget
Fixed cost 10,000
Variable cost ,000
50,000
Actual capacity attained 1,500 units
Flexed budget
Variable cost ,000
40,000
Cost actually incurred
Fixed cost 11,000
Variable cost ,000
44,000

9. Comparing actual with original budget Actual Budget Variance
Fixed cost 11, ,000 (1,000) UF
Variable cost 33, , ,000 F
44, , ,000 F
Comparing actual with flexed budget
Flexed Actual Variance
Fixed cost 10, ,000 (1,000) UF
Variable cost 30, ,000 (3,000) F
40, , ,000 UF
First Row and column
Than 11000
33000
10000
40000
1000
7000
Total
First 10000
30000
11000
3000

10. Practice Question Production cost at normal capacity: Direct cost
Direct material Rs. 30,000
Direct labor ,000
Indirect cost
Indirect material (Variable)
Other variable production OH cost ,200
Deprecation (Fixed) ,000
Other fixed OH cost ,000
Total budgeted cost ,000

11. Practice Question Normal capacity at 20,000 units
Direct material Rs. 26,900
Direct labor ,540
Indirect material (Variable) ,000
Other variable production OH cost ,660
Deprecation (Fixed) ,000
Other fixed OH cost ,400
Total budgeted cost ,500
Capacity attained 17,600 units
Prepare Flex budget at 16,000, 20,000 and 24,000 units