QUESTION 1

PART A

 You are provided with the given information relating to ABC Limited. The accountant is currently developing the budget for the next three months ending August 2010.

                     June         July        August
Sales             45,000    50,000    60,000
Wages           12,000    13,000    14,500
Overheads      8,500      9,500      9,000
 
Additional information:

1. 10% of sales are for cash, the balance is received the following month. The amount received in June for May's sales is Rs 29,500.

2. Wages are paid in the month they are incurred.

3. Overheads are settled the subsequent month. Rs 6,500 is to be paid in June for May's overhead.

4.  The opening cash balance in June is Rs 11,750.

5.  A tax bill of Rs 25,000 is to be paid in July.

Required:

Prepare cash budgets for the month of June, July and August 2010.

PART B

(i) What are the basic objectives of a budgetary planning and control system?

(ii) Describe what you understand by "incremental budgeting"

QUESTION 2: 

PART A

Barbados has prepared the subsequent standard cost information for its product Zeta

Raw material    50 kg @2.5        125
Direct labour   14 hrs @ 4.75      66.50

Actual results for the period were recorded as follows:
 
Production                               150 units
Direct material purchased        7,000 kg @ a cost of Rs 18,200
Opening stock direct materials 1,300 kg
Closing stock direct materials    850 kg
Wages paid for 2020 hrs           9898
 
 Required:

(i) Determine:

(a) Direct labour cost variance, analysed into rate and efficiency variances.

(b) Direct material cost variance, analysed into price and usage variances.

(ii)  Briefly illustrate three of the causes of material price variance and labour rate variance.   

PART B

(i) Briefly illustrate, supported by one example for each, what you understand by the subsequent types of cost,:

(a) Variable cost

(b) Fixed cost

(c) Step cost
          
(ii) Briefly explain four qualities of good accounting information.