EESE412: Explain the Importance of Budgeting as a Financial Plan - Accounting Assignment Help

Assignment Task:

Task:

Question 1 1.1 The former production manager who told his subordinates that he sees budgeting as a waste of company funds, has just resigned. Suppose that you have been appointed as a new production manager in your company. How would you introduce and explain the importance of budgeting as a financial plan in your department? (10)

1.2 Kumkani Ltd marks its inventory up by 60% of cost. Inventory at cost at the beginning of May is R120 000 which, as a policy, represents the anticipated sales for May. Management plans as a matter of policy to reduce inventory by 40%. If sales for June are budgeted at R240 000, calculate the May purchases if the new policy is implemented. (05)

1.3 The following information was extracted from the records of KG Limited for 2018. Actual Budgeted May June July August R R R R Cash sales before discount 70 450 60 948 74 000 82 000 Credit sales 35 664 41 500 53 000 58 000 Cash purchases 41 247 44 750 58 000 49 000 Credit purchases 19 639 38 250 34 000 45 000 Salaries and wages 43 000 43 000 47 000 49 000 Depreciation 7 000 7 000 8 000 8 000 Operating expenses 52 750 51 937 - - Additional information:

1. The favourable bank balance on 30 June 2018 amounted to R99 750.

2. The estimated provisional income tax payable on 30 August 2018 is R7 450.

3. Operating expenses are estimated to be 50% of the gross sales and is paid monthly in cash.

4. Cash discount of 5% on cash sales is allowed.

5. Debtors in respect of credit sales are collected as follows:

•  40% during the month of the sale 3
•  59% in the following month
•  1% is normally irrecoverable.

6. Creditors in respect of credit purchases are settled one month after the date of purchase and 2% discount is received.

7. Salaries and wages are paid in the middle of the month. At the end of every month, half of the salaries and wages are still in arrears.

8. Equipment costing R80 000 is to be purchased in June 2018. From July the amount will be settled in four equal monthly payments (no additional interests will be charged).

9. The directors are in agreement to redeem 120 000 redeemable preference shares of R2 each at par on 10 September 2018. Ordinary shares will be issued in August for the redemption. Required Prepare a cash budget for July and August 2018. Show all your workings. (35) [50]

Question 2 2.1 Evaluate the main differences between the periodic inventory system and perpetual inventory system in accounting for manufacturing concerns. (06)

2.2 Distinguish between a cost object and allocation in a manufacturing concern. Use practical examples to give clear distinction. (04)

2.3 These balances and totals appeared in the books of Lady Bee Manufacturers Ltd as at 1 December 2019.

Inventory: Raw material

– 1 January 2020 R90 000 Raw material purchased during the year 780 000 Labour cost 655 000 Rent 150 000 Electricity 75 000

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