Page 255 - BA2 Integrated Workbook - Student 2017

Answers to supplementary objective test questions

CHAPTER 6 – BUDGETING

6.1 The correct answers are:

 Repayment of a bank loan.

 Proceeds from the sale of a non-current asset.

Both these items result in a cash flow and would therefore be included in the
cash budget. Bad debts write off, depreciation of production machinery and
allocated fixed overheads would not be included in the cash budge as they do
not involve the movement of cash.

Workings for questions 6.2 and 6.3

October November December
Sales 500 450 520
Less opening inventory 100 120 150
Add closing inventory 120 150 130

Production/Purchases 520 480 500
Value of purchases (× $10) $5,200 $4,800 $5,000

6.2 B

Purchases in November = 480 units

6.3 C

Value of purchases in October = $5,200

6.4 The amount budgeted to be paid to suppliers in September is $289,000.
$

July ($250,000 × 5%) 12,500
August ($300,000 × 70%) 210,000
September ($280,000 × 25% × 95%) 66,500
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289,000
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