MAF551 Chapter 1 Budgeting Tutorial for Practice PDF

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APR 2009 Q5 A. Excellent Sdn Bhd a. Production budget

Unit to be sold + Planned Closing Inventory -Planned Opening Inventory

January 10 000 10% x 11,000 1,100 11,100 10% x 10,000 (1,000)

February 11 000 10% x 14,000 1,400 12,400 10% x 11,000 (1,100)

March 14 000 10% x 14,000 1,400 15,400 10% x 14,000 (1,400)

10,100

11,300

14,000

January 10,100 4

February 11,300 4

March 14,000 4

40,400 44,800

45,200 44,800

56,000 44,800

-

45200 - 44800 400

56000 - 44800 11,200

358,400

358,400

358,400

-

400 x 12 4,800

11,200 x 12 134,400

358,400

363,200

492,800

b. Labour Budget

Budgeted production X Hours per unit (RM1,280/160 x 50%) Total Hours Basic hrs available (160 hr/mnth x 280 workers) OT hours needed (hrs) Basic rate payment (RM1,280 x 280 workers) OT payment (RM) (1280/160) + (1280/160 x 50%) = 12 Total labour costs

APR 2013 Q5 A. Kristal Bhd a. Production budget

Budgeted volume + Closing Inventory

Ziezie 975 (975/13 weeks x 5 days) x 6 days

Brite 1,300 (1,300/13 weeks x 5 days) x 10 days

90 (160) 905

200 (360) 1,140

-Planned Opening Inventory Required Production

b. Material purchase budget for the period ending 30 March 2013 kg Required materials: Ziezie Brite

905 x 6kg 1,140 x 8kg

5,430 9,120 14,550 (2,300)

-Opening inventory +Closing Inventory

Ziezie (905/13 weeks x 5 days) x 6kg x 10 days Brite (1,140/13 weeks x 5 days) x 8kg x 10 days Total material purchased (kg) X cost per unit Budgeted material purchase

835 1403 14,488 RM10 RM144,880

c. Labour cost budget Hrs Required labour hours: Ziezie Brite Total labour hours Available basic hours OT needed Basic payment OT payment

905 x 8hrs 1,140 x 5hrs 24 x 37 hrs x 13 wks

11,544 x RM10 1,396 x RM10 x 130%

7,240 5,700 12940 11544 12940 – 11544 = 1396 115,440 18,148

Total budgeted labour cost

133,588

B i. Interview, estimates based on the opinion of executive and sales personnel, market research, statistical technique. ii. Increasing sales to existing customer – interview, estimates based on the opinion of executive and sales personnel, statistical technique Development of new market – market research Development of new product – market research B. Angsa Bhd a. i. Production budget Yr 5 Trend (Units) Seasonal Variation Forecast sales (unit)

1 1200

2 1300

3 1400

4 1500

Yr6 1 2 1600 1700

-150

+200

+300

-350

-150

+200

1050

1500

1700

1150

1450

1900

Unit to be sold + Planned Closing Inventory -Planned Opening Inventory Units to be Produced

1 1050 1500/2 750 1800 50% x 1050 (525) 1275

Quarter 5 2 3 1500 1700 1700/2 1150/2 850 575 2350 2275 50% x 1500 50% x 1700 (750) (850) 1600 1425

4 1150 1450/2 725 1875 50% x 1150 (575) 1300

ii.Purchasing budget Yr 5 Units to be produced X Usage (kg) Used in production +Desired closed inventory -Opening Inventory

1 1275 4 5100 80% x 6400 5120 10220 80% x 5100 (4080)

2 1600 4 6400 80% x 5700 4560 10960 80% x 6400 (5120)

3 1425 4 5700 80% x 5200 4160 9860 80% x 5700 (4560)

4 1300 4 5200 80% x 6700 5360 10560 80% x 5200 (4160)

Purchases (kg) 6140 5840 5300 6400 X Purchase Price (kg) 8 8 8 8 Cost 49120 46720 42400 51200 b) Activity based budgeting system is very different from traditional incremental budgeting system as traditional incremental budgeting system is done based on past year's data/budget where as in activity based costing, only current year's data is considered as base and budget is prepared thus this activity based budgeting system encourages managers to be innovative and creative because it is suitable for volatile and changing situations. Thus, activity based budgeting system are seen as a key of effective control as activity unit costs allow easier analysis of costs trends over time and intradepartmental comparisons. c) Major annual budgeting preparation exercise may not be an effective way to utilize business resources because this exercise can sometimes lead to unnecessary spending that only considers those outcomes which are financial in nature. Thus, budgeting requires a lot of time for its preparation of gathering information and assigning responsibilities of tracking data from various departments also with resources need for the appointments of a committee. This exercise may also seem as strategically rigid and variations which will be perceived to be inefficient thus affecting the performance negatively. Any slack built into budgets will provide for complacency on the part of employees and may not perform up to their potential capabilities to do better causing issue of apparent dysfunctional behaviours. Golden Sdn Bhd a) i) Chief operating officer and the group accountant. ii) Comparing actual performances against the budget and continuous assessment of budgeting and planning process. b. i)

Golden Sdn Bhd Sales Budget for the month of Dec 2016

Sales unit (packet) X Selling price per packet Total sales (RM) ii)

Shrimp 1,000 10 10,000

Fish 1,500 8 12,000

Golden Sdn Bhd Production Budget for the month of Dec 2016

Sales unit + Closing stock (i) & (ii)

Shrimp 1,000 300 + (200 x 100 -75%) 350

Fish 1,500 200 + 50 250

Total needed for production - Opening stock Total unit to be produced

iii)

1,350 (200) 1,150

1,750 (300) 1,450

Golden Sdn Bhd Direct Material Usage & Purchase Budget for the month of Dec 2016

Production unit Shrimp (1,150 packet) Fish(1,450 packet) Direct Material usage + Closing stock (kgs) (iii) & (iv) Total direct material usage -Opening stock Total direct material to be purchased X cost per kg (RM) Direct material purchase (RM) iv)

Flour

Paste

2.5 kg x 1,150 2,875 3.0 kg x 1,450 4,350 7,225 60% x 2,500 1,500 8,725 (2,500) 6,225 2.50 15,562.50

3.0 kg x 1,150 3,450 2.0 kg x 1,450 2,900 6,350 2,000 8,350 (1,500) 6,850 5.00 34,250

Golden Sdn Bhd Direct Labour Budget for the month of Dec 2016

Production unit Shrimp (1,150 packet) Fish(1,450 packet) Total direct hour needed (hrs) X Rate per hour (RM) Total direct labour costs (RM)

Skilled

Semi-skilled

2.0 hr x 1,150 2,300 1.5 hr x 1,450 2,175 4,475 10 44,750

3.0 hr x 1,150 3,420 2.5 hr x 1,450 3,625 7,075 5 35,375

Am Deco a) A cash budget is prepared is to aid the planning of actual operations and to coordinate the activities of the operations. b) i) Am Deco Production Budget for the month of Feb 2019 Forecasted sales (unit) + Closing stock

Teakwood (Set A) 1,500 250 + (10% x 250)

Plywood (Set B) 1,800 300 + (10% x 300)

275 1,775 (250) 1,525

Total needed for production - Opening stock Total unit to be produced ii)

330 2,130 (300) 1,830

Am Deco Material Budget for the month of Feb 2019

Production unit Teakwood (1,525 units) Plywood (1,830 units) Total needed for production + Planned closing Total direct material needed -Opening stock Total direct material to be purchased X cost per metre (RM) Direct material purchase (RM) iii)

Plywood (1,830 units) Total direct hour needed (hrs) X Rate per hour (RM) Total direct labour costs (RM)

Departments Material Teakwood Plywood

Set B 1,800 30m x 1,525 30,500 15m x 1,830 27,450 57,950 3,000m x 95% 2,850 60,800 (3,000) 57,800 20 1,156,000

Am Deco Direct Labour Budget for the month of Feb 2019

Departments Production unit Teakwood (1,525 units)

iv)

Set A 1,500 40m x 1,525 61,000 20m x 1,830 54,900 115,900 15,000m x 95% 14,250 130,150 (15,000) 115,150 50 5,757,500

Cutting

Assembling

4 hr x 1,830 7,320 7 hr x 1,830 12,810 20,130 40 805,200

3 hr x 1,830 5,490 6 hr x 1,830 10,980 16,470 30 494,100

Am Deco Production Cost Budget for the month of Feb 2019 Set A

Set B

3,050,000 610,000

2,745,000 5,490,000

Labour Production overhead

564,250 564,250 x 20% 112,850 4,337,100

PRODUCTION COST

549,000 549,000 x 20% 109,800 3,952,800

MAF420 October 2009 a. ESQ Sdn Bhd Performance Report for Period 3

Production and sales (units) Sales (SP – RM10) 60,000/6,000 Direct Materials (UVC – RM3) 18,000/6,000 Direct Labour (UVC – RM2) 12,000/6,000 Rental & rates (fixed costs) Depreciation (fixed costs) Maintenance (UVC – RM0.35) = 10000 x 6000/10000 8000 x 4000/10000 = 6000 – 3200/8000 = 2800/8000 Other costs (UVC – RM1) 8,000/8000

Profit

Original/budget 6000

Flexible 8000

Actual 8000

Variances 0

RM 60,000

RM 8,000 x 10 80,000 8000 x 3 24,000

RM 75,000

RM 5,000 (A)

25,000

1,000 (A)

18,000 12,000

8000 x 2 16,000

15,000

1,000 (F)

3,000 5,000 3,000

3,000 5,000 (0.35 x 8,000 + 900)

3,800 5,500 4,000

800(A) 500(A) 300(A)

11,000

1,000(F)

49,000

3,700 (8,000 x 1 + 4,000) 12,000 63,700

64,300

600(A)

60,000 – 49,000 11,000

80000 - 63700 16,300

75,000 – 64,300 10,700

8,000

b. ESQ Sdn Bhd Statement of Reconciliation for Period 3 RM Budgeted Profit Sales per variance Sales per profit

RM

RM 11,000

80,000 – 75,000 5,000 (A) 16,300 – 11,000 5,300 (F) 300(F)

Direct material Direct labour Rental & rates Depreciation Maintenance Other costs

1000

1,000

Actual Profit

2,000

1,000 800 500 300 2,600

600(A) 10,700

MAF420 JUNE 2012 MAF420 October 2009 A. Use high low method to aggregate the costs as follows: Utilities Supplies Indirect labour Maintenance 46,000 – 5,000 Supervision

Variable Cost per unit (RM) 51,000 – 43,000/ 50,000 – 40,000 0.80 30,000 – 28,000/ 50,000 – 40,000 0.20 20,000 – 16,000/ 50,000 – 40,000 0.40 41,000 – 34,000/ 50,000 - 40,000 0.70 -

Fixed Cost (RM) 51,000 – (0.80 x 50,000) 11,000 30,000 – (0.20 x 50,000) 20,000 41,000 – (0.70 x 50,000) 6,000 15,000

a. Omega Sdn Bhd Performance Report for April 2012

Production & sales (units) Machine hours (Hours) Sales (100% - 2.5%) New: 97.5% x 24 = 23.4 Variable costs: Utilities Supplies Indirect labour

Flexible 8,500 42,500

Actual 8,500 42,500

RM 24 x 8,500 204,000

RM 23.4 x 8,500 198,900

0.80 x 42,500 34,000 0.20 x 42,500 8,500 0.40 x 42,500 17,000

45,850 – 11,000 34,850 26,375 – 20,000 6,375

Variances 85% x 50,000 = 42,500 RM 5,100(A) 850 (A) 2125 (F) 2000 (A)

19,000

Maintenance Fixed costs: Utilities Supplies Maintenance 46,000 – 40,000 Supervision Profit

0.70 x 42,500 29,750

38,750 – 11,000 27,750

2000 (F)

11,000 20,000 6,000 + 5,000 15,000 15,000 146,250 57,750

11,000 20,000 6,000 + 5,000 15,000 15,000 144,975 53,925

-

1,275(F) 3,825(A)

b. Omega Sdn Bhd Statement of Reconciliation for April 2012 RM

RM

Budgeted Profit Sales per selling price Sales per profit/volume

5,100(A) 78,000 – 57,750 20,250(A)

RM (10,000 x 24) – 162,000 78,000 25,350(A) 52,650

Adjust for cost variances: Utilities Supplies Indirect labour Maintenance Supervision

F 2125

2000 2000 4,125

Actual Profit

A 850

2,850

1,275(F) 3,825(A) 53,925

MAF551 JULY 2017 BESTARI CONSULTING SERVICES

Sales

Consultations Miscellaneous Office expenses RM780,000 – RM720,000 / 17,000 – 14,000 RM20 per hour Profit/(loss)

17,000 hours RM 17,000 x 200 3,400,000

18,000 hours RM 18,000 x 200 3,600,000

19,000 hours RM 3,600,000 + (110% x 200 x 1,000) 3,820,000

(60,000 x 12) 720,000 20 x 17,000 340,000 440,000 + 340,000

(60,000 x 12) 720,000 20 x 18,000 360,000 440,000 + 360,000

720,000 + (60 x 1,000) 780,000 20 x 19,000 380,000 440,000 + 380,000

780,000

800,000

820,000

3,400,000 – 1,840,000 1,560,000

3,600,000 – 1,840,000 1,720,000

3,820,000 – 1,840,000 1,840,000

b. (i) Goal congruence Goal congruence occurs in a budgetary control system when the goals of an individual or a department are the same as the goals of the organization as a whole. √ This means that by aiming for their own personal goals, individuals will automatically be aiming to achieve organizational goals. Budgetary slack Budgetary slack is unnecessary expenditure built into the budget. √ It often arises when budgets are used punitively, so that managers build in extra authorized expenditure to cover themselves against unforeseen circumstances.

Aspiration levels Aspiration levels are the personal targets for performance which individuals set for themselves. √ Feedback Feedback of information occurs when budget managers receive data showing the actual results for a budget period compared with the budgeted results. √ If feedback is timely, management can take action to correct any variances which are revealed by the budget comparison.

Feed forward Feed forward control involves comparing the forecast results with the desired outcome√. If variances are forecast then management can take control action now to bring the forecast results in line with the future desired outcome (ii) TWO (2) possible ways dysfunctional effects of budgeting can be avoided: 1. Allow for participation in the budgetary process√ Individuals are more likely to be willing to work to achieve a budget target if they have been involved in setting it. √ They will perceive the target to be realistic and not simply imposed on them by managers who do not understand the day to day operations as well as they themselves do. However, it is important that the participation is real, and not just a cosmetic exercise to get an individual’s approval for a budget which has in reality already been decided. √ Such ‘pseudo-participation’ is more demotivating than having no participation at all. 2. Take into account of individual aspirations in setting budget targets One of the best ways of achieving this is again through a participative budgetary planning system. An individual can be demotivated if the budget is set either too far above or too far below their personal aspiration level. √ 3. Communicate budget targets to those responsible for their achievement Dysfunctional behaviour will result if individuals do not know what is expected of them.

4. Provide relevant information as frequently as possible Feedback reports must be provided frequently, as soon as possible after the budget period has ended. Information provided must be clear, uncluttered and relevant to the recipient.

MAF551 JULY 2017 a. i. SERI MELUR INSTITUTION Revised Performance Report for the year ended 31 December 2016 Flexed Budget Actual Number of students registered 600 600 RM RM Revenue: Tuition fees (90% x 600 x 7,000) + 210,000 3,780,000 + 210,000 3,990,000 3,905,40 0 Sponsorship 60 x 7,000 x ½ = 210,000 198,500 TOTAL REVENUE 4,200,000 4,103,90 0 Cost: Remuneration Higher authority staff & deputies (6,000 x 13)+(5,000 x 2 x 13)=208,000 254,500 Teachers 4,000 x (25-1) x 12 = 1,152,000 1,220,00 0 Support staff 2800 x 5 x 12 = 168,000 158,265 Maintenance & utilities 60,000 75,894 Auxiliary security service 72,000 72,000 Depreciation 720,000 720,000 Instructions supplies & materials 27,500 / 550 x 600 30,000 45,158 Training & workshops (32,500 / 25 x 24) + 5,000 41,569 (37,500 -5,000 = 32,500) 36,200 Total cost 2,446,200 2,587,88

Variance RM

84,600

A

11,500 96,100

A A

46,500 68,500

A A

9,735 15,894

F A

15,158 5,369

A A

141,686

A

NET PROFIT

1,753,800

6 1,516,01 4

237,786

ii. Fixed budget is prepared for a single activity level. Comparison between a budgeted against the actual activity level may not be fair. This is due to: 1. Different activity level between the budgeted data and actual data. For example, budgeted data show 550 students, while actual registered students and 600. 2. The change in volume will cause the amount of costs to be different, specifically the variable costs. Therefore, the performance report based on fixed budget will not reflect the true performance of the institution. The report shows adverse variance for the cost items because the budgeted is lower than the actual which due to higher volume of actual activity.

iii. Participative budgeting in an organisation Advantages Improve morale and motivation among employees Increased operational managers’ commitment to organisational objectives Budget becomes more realistic Improves coordination between units

Disadvantages Time consuming Managers may create budgetary slack

MAF551 DEC19 a) 5 benefits of ZBB are: ZBB assumes that the previous period’s activities are not relevant to the current period. So is its allocation of resources. Therefore, all activities plan for the future are to be evaluated as it is never being held or conducted. It is evaluated from a zero base. By its nature, it encourages a bottom-up approach to budgeting in order for ZBB to be used in practice. This should encourage motivation of employees. It challenges the status quo and encourages a questioning attitude among managers. It responds to changes in the business environment from one year to the next. Overall, it should result in a more efficient allocation of resources. Topspot Corporation Manufacturing Overhead Flexible Budget Report for the month of November 2019

A

Production in units Indirect materials Indirect labour (W1) Utilities Maintenance (W1) Depreciation Taxes & insurance Other costs TOTAL COSTS

Budget 118,500 RM 5,925 20,775

Actual 118,500 RM 5,910 20,000

Variance RM 15 775

F F

11,850 8,275

11,880 8,300

30 25

A A

16,800 4,200 1,900 69,725

16,800 4,200 2,000 69,090

0 0 300 635

F F

b. Maintenance costs: VC= 8,225 – 2,350 = 5,875 VC per unit =5,875/117,500 = RM0.05 Revised costs = (0.05 x 118,500) + 2,350 = 8,275

Indirect Labor: VC= 20,625 – 3,000 = 17,625 VC per unit =17,625/117,500=RM0.15 Revised costs = (0.15 x 118,500) + 3,000 = 20,775 Other costs: Fixed costs = 1,500 Units increased = 118,500-118,000 = 500 step costs = (500/250) x RM200= 400 Revised costs = 1,500+400 = 1,900 c. Under Top-down approach, budgets are set by senior managers and given to operational managers as targets. This approach is likely to be quicker a...