Example 1

A/C Head 70% 80% 90%

Budgeted hours 7000 8000 9000

Variable Expenses 1260 1440 1620

Semi variable expenses 1200 1200 1320
Fixed Expenses 1800 1800 1800
Total Expenses 4260 4440 4740
Recovery Rate/Hour
Total Expenses/Bud hours 0.61 0.56 0.53
 100%
10000

1800 0.18
1440
1800
5040

0.50
 Example 2
A department of a company X attains sale of Rs. 6,00,000 at Rs. 80 per cent of its normal c

Administration costs Rs.

Office Salaries 90,000

General Expenses 2 per cent sales
Depreciation 7500
Rates and Taxes 8750

Selling costs

Salaries 8% of Sales
Travelling expenses 2% of sales
Sales office expenses 1% of sales
General expenses 1% of sales

Distribution costs
Wages 15,000
Rent 1% of sales
Other expenses 4% of sales

Prepare flexible administration, selling and distribution, cost budget, operating at 90%, 100

SolutionFlexible Budget
80% 90% 100%
Sales 600,000.00 675,000.00 750000

Adminstration Expenses
office salaries 90000 90000 90000
General expenses (2% of sales) 12,000.00 13,500.00 15,000.00
Depreciation 7500 7500 7500
Rent and rates 8750 8750 8750
A Total Admin Costs 118250 119750 121250

Selling Costs
Salaries(8% of sales) 48,000.00 54,000.00 60,000.00
Travelling Expense(2% of Sales) 12,000.00 13,500.00 15,000.00
Sales office (1% of sales) 6,000.00 6,750.00 7,500.00
General Expense(1% of sales) 6,000.00 6,750.00 7,500.00
B Total Selling Cost 72,000.00 81,000.00 90,000.00

Distribution Cost
Wages (fixed) 15000 15000 15000
Rent (1% of sales) 6,000.00 6,750.00 7,500.00
Other expenses (4% of sales) 24,000.00 27,000.00 30,000.00
C Total Distribution Cost 45000 48750 52500

Total Cost (A+B+C) ### ### ###

80 per cent of its normal capacity and its expenses are given below.

get, operating at 90%, 100% and 110% of normal capacity

110%
825000
0.8 600000
1 750000
90000
16,500.00
7500
8750
122750

66,000.00
16,500.00
8,250.00
8,250.00
99,000.00

15000
8,250.00
33,000.00
56250

###
P.8.2 The following data relate to the working of factory at Wardha for the current year:
Capacity worked, 50 per cent
Fixed costs:
Salaries
Rent and rates
Depreciation
Other administrative expenses

Variable costs:
Materials
Labour
Other expenses

Possible sales at various levels of working are:

Capacity (per cent) Sales

Prepare a flexible budget and show the forecast of profit at 60, 75, 90, and 100 per cent ca

Percentage of capacity worked

Sales revenue

Less: Costs:
Variable costs:
Materials
Labour
Other expenses
(A) Total variable cost

Fixed costs:
Salaries
Rent and rates
Depreciation
Other administrative expenses
(B) Total fixed cost

Total Cost (A+B)

forecast profit
 84,000
56,000
70,000
80,000

240,000
256,000
38,000

60% 75% 90% 100%

950,000 1,150,000 1,375,000 1,525,000

and 100 per cent capacity operations.

60% 75% 90% 100%

950,000 1,150,000 1,375,000 1,525,000

288000 360000 432000 480000

307200 384000 460800 512000
45600 57000 68400 76000
640800 801000 961200 1068000

84,000 84,000 84,000 84,000

56,000 56,000 56,000 56,000
70,000 70,000 70,000 70,000
80,000 80,000 80,000 80,000
290,000 290,000 290,000 290,000

930,800 1,091,000 1,251,200 1,358,000

19,200 59,000 123,800 167,000
 Cash Budget
Example 1

Infotech Ltd. commences business on 1st April 2016 and deposits Rs. 100000 in the Global
to finance its operations over a period of four months. As a finance manager, you are asked
overdraft limit to seek from the company's bankers.

Requisite data is as under -(i) Sales are made to one distributor only on 30 days terms, 2%
(ii) Furniture purchases for Rs. 10,000 preferred to be made in April 2016
(iii) Budget figures are -
₹
Particulars April May June July
Purchases 50,000 40,000 30,000 40,000
Wages 40,000 50,000 40,000 40,000
Cash expenses 4,000 5,000 4,000 4,000
Sales 60,000 70,000 80,000 80,000

All purchases are made on net 30 days' terms and cheques are posted to creditors on the l

Cash Budget
₹
Particulars April May June July
Cash Receipts:
(a) Cash receipts from distributor 58800 68600 78400

Cash Payments
Payment to creditors 50,000 40,000 30,000
Wages 40,000 50,000 40,000 40,000
cash expenses 4,000 5,000 4,000 4,000
Furniture purchases 10,000
(b) 54000 105,000 84,000 74,000
(a)-(b) Net cash receipts/(deficits) -54000 -46200 -15400 4400

Balance (overdraft) at the start

of the month 100000 46000 -200 -15600

Overdraft required monthwise -200 -15400

 Rs. 100000 in the Global Trust Bank. The sum deposited would not be sufficient
e manager, you are asked to prepare a cash budget from 1st April 2016 to 31st July 2016 to ascertain the month

nly on 30 days terms, 2% discount and cheques are received on the first date of the following due date.

sted to creditors on the last day of the month due.

16 to ascertain the monthly

lowing due date.

 Example 2
Cash Budget

A company is expecting to have a cash in hand Rs 35000 on 1st April 2015

Prepare a budget for April, May and June 2015from the information below.

Months Sales Purchases Wages Expenses

Feb 70000 40000 8000 6000
Mar 80000 50000 8000 7000
Apr 92000 52000 9000 7000 24000 59000
May 100,000 60000 10000 8000
June 120000 55000 12000 9000

Other information
Period of credit allowed by supplier in 2 months
25% sales are for cash and period of credit allowed to customers for credit sales is 1 month
Delay in payment of wages and expenses is 1 month
Income tax of Rs. 20,000 is to be paid in june 2015

Particulars Apr May June

A Opening Balance 35000 63000 91000
Plus Receipts
Cash Sales (25%) 23000 25000 30000
Collection from debtors from 60000 69000 75000
previous period (rest 75%)
83000 94000 105000
B Payment creditors(before 2 mnths -40000 -50000 -52000
Wages (last month) -8000 -9000 -10000
Expenses (last month) -7000 -7000 -8000
Income Tax -20000
C -55000 -66000 -90000
63000 91000 106000
r credit sales is 1 month
Format of Cash Budget
₹
Opening Balance of Cash (a) xxxx

Receipts
Cash Sales xxx
Collection from debtors xxx
Dividend/interest received xxx
Sale of fixed assets xxx
Sale of investments xxx
Raising of loans xxx
Tax refund xxx
Other capital/revenue receipts xxx
(b) XXX
Payments
Creditors for materials xxx
Creditors for wages and exp xxx
Debenture interest xxx
Dividend xxx
Purchase of fixed asset xxx
Purchase of investments xxx
Repayment of loans xxx
(C) XXX

Surplus/Shortage b-c=d XXX

Closing balance of cash a+d XXX
Prepare a Cash Budget for the three months ending 30th June, 2016 from the information g

Rs
MONTH SALES cash sales Credit sales
February 14,000 1,400 12,600
March 15,000 1,500 13,500
April 16,000 1,600 14,400
May 17,000 1,700 15,300
June 18,000 1,800 16,200

(b) Credit terms are:

Sales / Debtors : 10% sales are on cash, 50% of the credit sales are collected next month a
in the following month.
Creditors: Materials 2 months
Wages 1/4 month
Overheads 1/2 month.

(c) Cash and bank balance on 1st April, 2016 is expected to be ` 6,000.

(d) Other relevant information are:

(i) Plant and machinery will be installed in February 2016 at a cost of Rs. 96,000. The mont
installment of Rs.2,000 is payable from April onwards.
(ii) Dividend @ 5% on preference share capital of Rs. 2,00,000 will be paid on 1st June.
(iii) Advance to be received for sale of vehicles Rs. 9,000 in June.
(iv) Dividends from investments amounting to Rs.1,000 are expected to be received in June

Cash Budget ending for 3 months ending 30th June 2016

April
Opening Balance 6000
Add:Receipts
Cash Sales 1600
Collection from
Debtors 0
016 from the information given below:

Rs. Rs. Rs.

MATERIALS WAGES OVERHEADS
9,600 3,000 1,700
9,000 3,000 1,900
9,200 3,200 2,000
10,000 3,600 2,200
10,400 4,000 2,300

re collected next month and the balance

t of Rs. 96,000. The monthly

ll be paid on 1st June.

cted to be received in June.

Rs
MONTH SALES cash sales Credit sale
February 14,000 1,400 12,600
May June March 15,000 1,500 13,500
April 16,000 1,600 14,400
May 17,000 1,700 15,300
June 18,000 1,800 16,200
Rs. Rs. Rs.
MATERIAL WAGES OVERHEADS
9,600 3,000 1,700
9,000 3,000 1,900
9,200 3,200 2,000
10,000 3,600 2,200
10,400 4,000 2,300