Page 301 - BA2 Integrated Workbook STUDENT 2018

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.

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

Workings for questions 6.2 and 6.3

October November December
units units units
Sales 500 450 520
Less opening inventory 100 120 150

Add closing inventory 120 150 130
––––– ––––– –––––
Production 520 480 500

litres litres litres
Chemical X required (× 2 litres) 1,040 960 1,000
Less opening inventory 40 50 60
Add closing inventory 50 60 50
––––– ––––– –––––

Chemical X purchases (litres) 1,050 970 990

––––– ––––– –––––
Chemical X purchases (×$3.50) $3,675 $3,395 $3,465

––––– ––––– –––––

6.2 B

Production in November = 480 units

6.3 D

Value of chemical X to be purchased in October = $3,675

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