Answers to Managerial Accounting Questions

Hello Prof. Vinod, I am a student and I need some help in answering my management accounting questions.
Question :1

a); From the information provided, calculate the closing stock of raw materials and finished goods and present the raw materials budget and the finished goods budget for each month from July 2012 to October 2012 inclusive. Your answers should be expressed in either kilograms or cogs, as appropriate. b) Calculate and present the sales revenue budget and production cost budget for each month from July 2012 to October 2012 inclusive. c) Prepare and present the cash budget for each month from July to October 2012 inclusive. Question : 2; From the information provided, prepare a budgeted income statement for the four months to 31st October 2012 and a budgeted statement of financial position as at 31st October 2012. Ignore taxation. Additional information: Purchase of New Equipment
Tiesta has decided that the new equipment will be delivered in July and paid for in August. She has made arrangements for the company to issue 10% debentures to the value of £130,000 to be repaid in the year 2019. Interest on the debentures will be paid by two six-monthly instalments, in arrears. £130,000 will be credited to the company's bank account on 1st August 2012. Credit terms
• All sales are on credit and two months' credit is allowed. • All purchases of raw materials are on credit and are paid for one month following purchase. • Wages, variable and fixed overheads are paid in the month in which they are incurred. Proposed Dividend
Since Tiesta will make a considerable investment in purchasing the business, she intends to propose a dividend of 7% in October 2012. Note: finished goods stocks are valued at marginal cost for budget purposes. Information below which will help you to answer the questions above: Estimated production Data Estimated selling price per cog mechanism £240 Estimated materials usage per cog mechanism 1 kilogram Estimated cost of materials per Kilo £45 Estimated production wages and variable overheads per cog mechanism £65 Estimated fixed overheads per month £3,300 Months in Budget Period 4 Months in Year 12 Months for Accrued Interest 3 Interest Rate on Debenture 10% July Augus Septembe October Estimated sales of cog mechanisms 11 115 11 80 Estimated production of cog mechanisms 100 120 110 70 Estimated cost of raw materials (kilos) 100 110 100 60 Stock of raw materials (Kilos) 100 Stock of finished goods (Cogs) 110 Loan £130,000 New Equipment £110,000 Depreciation July to October £ Buildings 355 Machinery (including depreciation on the new equipment) 15,200 Vehicles 5,000 Proposed Dividend 7% Budgeted Statement of Financial Position as at 30th June 2012 Non-Current Assets Cost Depreciation to date NBV Land & buildings 120,000 20,000 100,000 Machinery & equipment 50,000 44,000 6,000 Motor vehicles 52,000 16,000 36,000 222,000 80,000 142,000 Current Assets Stock of raw materials (100 kilos) 4,500 Stock of finished goods (110 cogs) 12,100 Debtors: May 5,900 June 13,100 19,000 35,600 Creditors (amounts due within one year) Trade creditors for raw materials 3,900 Bank overdraft 17,250 21,150 14,450 156,450 Capital and Reserves: Ordinary share capital (£1 shares) 100,000 Retained profits 56,450 156,450 Mehmet Gilgil from UK

Dear, you have asked 2 main questions and in 1st questions, there are 3 parts a,b and c. Ok, I try to answers your questions. Main aim to answer is to teach the fundamentals. Actually, all these problems are made on the basic knowledge of management accounting. If you know, it is easy for you to complete this assignment problem.

Answer : 1 (a)

In the question 1's a part, you have asked about value of closing stock or raw material and value of closing stock of finished stock and to show the budget of raw material and finished goods from july to oct. 2012.

Following is the formula of COG (Cost of goods sold). With this formula, we can calculate the closing stock of raw material and closing stock of finished goods

Cost of Goods Sold = Opening stock + Purchase + Direct Expenses - Closing Stock

In case of raw material

Because raw material is converted into production not in sale. so, difference between opening stock of raw material + purchase of raw material and closing stock will be the cost of production.


Cost of Production = Opening stock of raw material + purchase of raw material + Wages and variable cost for production - closing stock of raw material.

In case of Finished Goods

Cost of Goods Sold = Opening stock of finished goods + Purchase of finished goods + cost of production of finished goods - Closing stock of finished Goods

Now, check the figures and try to put in above formula for calculating your desired answer.

Answer 1 (b)

In 1's b question, you have asked to prepare the sale revenue budget and Production Cost Budget. Try to Understand both from basics.

Sale Revenue Budget

Sale Revenue Budget will tell you the expected sale which you will get during budgeted period.



 July 2012Aug. 2012Sept. 2012Oct. 2012
Forecasted unit sales          

x Price per unit


Total gross sales



- Sales discounts & allowances



= Total net sales



Now, you just put the figures in above sales revenue budget format for finding your question's desired answer.

Please Bookmark this page, soon, I will answer all other pending questions.

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Accounting Education: Answers to Managerial Accounting Questions
Answers to Managerial Accounting Questions
Accounting Education
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