Question 01.

The Enterprise Company manufactures two products, known as Alpha and Sigma. Alpha is produced in
department 1 and Sigma in department 2. The following information is available for 2010.

1. Standard material and labour costs.

Details TZS
Material X 7.20 per unit
Material Y 16.00 per unit
Direct labour 12.00 per hour
Overhead is recovered on a direct labour hour basis.

2. The standard material and labour usage for each product is as follows:
Model Alpha. Model Sigma.
Material X 10 units 8 units
Material Y 5 units 9 units
Direct labour 10 hours 15 hours

3. The balance sheet for the previous year end 2010 was as follows:
Details Tshs Tshs
Fixed assets:
Land 170,000
Buildings and equipment 1,292,000
Less depreciation 255,000 1,037,000
1,207,000
Current assets:
Inventories, finished goods 99,076
Raw materials 189,200
Debtors 289,000
Cash 34,000 611,276
1,818,276
Current liabilities
Creditors 248,800
Total liabilities 248,800

Represented by shareholder’s interest:

1,200,000 ordinary shares of TZS1 each 1,200,000
Reserves 369,476 1,569,476
1,818,276

4. Other relevant data is as follows for the year 200X:

Finished product. Model alpha Model sigma

Forecast sales (units) 8,500 1,600
Selling price per unit £400 £560
Ending inventory required (units) 1870 90
Beginning inventory (units) 170 85

Direct material. Material X Material Y

Beginning inventory (units) 8,500 8,000
Ending inventory required (units) 10,200 1,700
Budgeted variable overhead rates.
(per direct labour hour): Dept 1 (TZS) Dept 2 (TZS)
Indirect materials 1.20 0.80
Indirect labour 1.20 1.20
Power (variable portion) 0.60 0.40
Maintenance (variable portion) 0.20 0.40

Budgeted fixed overheads.

Depreciation 100,000 80 000
Supervision 100,000 40,000
Power (fixed portion) 40,000 2,000
Maintenance (fixed portion) 45,600 3,196

Estimated non-manufacturing overheads: TZS

Stationery. Administration 4 000
Salaries Sales 74,000
O ice 28,000
Commissions 60,000
Car expenses Sales 22,000
Advertising 80,000
Miscellaneous O ice 8,000
276,000

5. Budgeted cash flows are as follows:

Quarter 1 Quarter 2 Quarter 3 Quarter 4
TZS TZS TZS TZS
Receipts from customers 1,000,000 1,200,000 1,120,000 985,000
Payments:
Materials 400,000 480,000 440,000 547,984
Payments for wages 400,000 440,000 480,000 646,188
Other costs and expenses 120,000 100,000 72,016 13,642

Required
Prepare a master budget for the year 2010 and the following budgets:
1. Sales budget.
2. Production budget.
3. Direct materials usage budget.
4. Direct materials purchase budget.
5. Direct labour budget.
6. Factory overhead budget.
7. Selling and administration budget.
8. Departmental budget for Dept 1.
9. Master budget.
10. Cash budget.
Question 02.
Plan co ltd is preparing its budget for the year ending 31 Dec 2020. The following information has been
collected to facilitate the budgeting exercise.

Sales. The company manufactures and sells two products A and product B. During the forthcoming
budget period the company expects the demand for product A to be 10,000 units and the demand for
product B to be 7,500 units

The unit selling prices for product A and B are Tshs600 and Tshs700 respectively.

Production. Material requirements per units of output.

Product Material X (Kg) Material Y (Ltr) Material Z (Units)
A 3 1.5 -
B 5 3 2
Cost 24 per Kg 16 per Ltr 20 per Units

Labour. Labour hours requirement per unit of output

Product A Labour Department Department
Unskilled Labour 4 2
Semiskilled Labour 1 1

Product B Unskilled Labour 5 3

Semiskilled Labour 1 2

Labour rate/hr Unskilled Labour 20/=

Semiskilled Labour 30/=

Production overhead.

Variable production overheads are absorbed at the following rates.

Department 1 10/= per Direct Labour Hour
Department 2 8/= per Direct Labour Hour

Fixed production overheads are absorbed at a rate of 5/= per direct labour hour.

Other overheads all fixed amount to 1,200,000 p.a.

Beginning and ending inventories

The following inventory levels are expected.

Anticipated Beginning
Material Inventories Target Ending Inventories
X 1000 1200
Y 500 500
Z 2000 1100

Work in Progress. Both beginning and ending inventories 100% complete for material 50% converted.
Product A 0 0
Product B 1,200 500
Finished goods
Product A 100 450
Product B 1,200 500
Required: Prepare an operating budget with supporting schedule for the period ending 31 Dec 2020.
Question 03.
Suppose to the details in the preceding question (Plan co ltd), we had the following additional
information. We could prepare manpower budget for unskilled labour.

Labour e iciency 95%

Absentee rate 7.5%
Number of working weeks per year 46
Number of working days per week 5
Number of working hours per day 8
Planned over time Dept.1 0
Planned over time Dept.2 1,120 hours.

Required: Prepare manpower budget for unskilled labour.

Question 04.
Amazing Plc manufactures and sells di erent kinds of leather bags. The following is the statement of
financial position (balance sheet) for the year ended 31 December 2022.

Amazing Plc Statement of financial position as at 31 December 2022

Details TZS 000 TZS 000

Assets
Non-current assets
Plant and machinery at cost 30,000
Less: Depreciation (7,500) 22,500
Current assets
Inventory 30,000
Receivables 22,500
Cash 52,500 105,000
Total assets 127,500

Equity and liabilities

Capital and reserves.
Share capital (Tshs10,000 each) 34,000
Reserves and surplus 15,000
Current liabilities
Payables 60,000
Proposed dividend 18,500
Total equity and liabilities 127,500

The company is planning to prepare a cash budget for the first quarter of 2023. The following additional
information is provided:

(i) Budgeted information for the first quarter (Jan – Mar) of 2023 is given below:

Jan 2023 TZS 000 Feb 2023TZS 000 Mar 2023TZS 000
Credit sales 27,000 30,000 37,500
Cash sales 7,500 9,000 12,000
Credit purchases 25,500 20,500 39,000

(ii) All credit sales are paid in the month following sales and all trade payables are paid one month in
arrears.

(iii) The proposed dividend will be paid in March 2023.

(iv) The following expenses will be paid:
• Sta salary: Tshs6,750,000 per month.
• Rent of Tshs15,400,000 for the first quarter of 2023 will be paid in January 2023.
• Depreciation on the plant and machinery will be provided @10% per annum.

Required: Prepare a cash budget for the first quarter of 20X3.

Question 05.
Tanzania Glass Company is preparing its cash budget for the first quarter of the year. The company uses
an equipment that is characterized by frequent stoppages to let it cool down to operating temperatures.
A reminder that the equipment is due for replacement has been set and this has resulted to slow pace of
production. The management is keen at preparing a cash budget that will depict inflows and outflows
after installing a new machine.

The following information has been collected to facilitate the budgeting exercise.

Sales (actual or estimated) over the last quarter of year 4 and the first quarter of the year 5 are as shown
below.
October year 4 150,000 (actual)
November year 4 145,000 (actual)
December year 4 145,000 (estimated)
January year 5 130,000 (estimated)
February year 5 175,000 (estimated)
March year 5 250,000 (estimated)

The company plans to buy and install a new machine in January year 5, this will cost Tshs 604,500 all of
which will be paid in January.

Wages which are paid in the month in which they are incurred are expected to fall from the Tshs 40,000
December year 4 level to Tshs 30,000 in January and to Tshs 20,000 in subsequent months.

Purchases of materials in each month amount to 30% of that month planned sales value, suppliers for
materials allow 1 month’s credit and the company fully avails itself of this credit facility.

Fixed overhead have been at Tshs 70,000 (including 20,000 for depreciation). Except for the monthly
depreciation charge which is expected to increase by Tshs 5000 in January, following the installation of
the new machine this is the level anticipated for the foreseeable future.

50% of the sales of each month result in cash being collected in the month of sale, 30% of sales lead to
cash being collected in the month following the month of sales and the remaining balance is collected in
the second month after the month of sale

There are no bad debts and discounts allowed.

The cash balance as at 30 November year 4 is Tshs 5,000

Required:

a. Prepare a cash budget for the first quarter of year 5.

b. if the company plans to meet any cash deficit by obtaining an overdraft and it is expected that the
march year 5 level of activity is going to be maintained for the foreseeable future in what month will the
company be able to complete repayment of the overdraft (Ignore taxation and interest payments).