Excel Applications in Budgeting (Problems taken from Managem

I Sales Budget:

Problem 1. (Example 1. Page 2.11) AB Ltd. manufactures two types of product A and B a
available for the year 2023-24

Market Product

X A
B
Y A
B

Sales forecast for the next year reveals that product A is very popular but at the same time u
ready market even if its price is increased by Rs.1. On the other hand, product B is over-pri
management has approved the plan to give effect to the above price changes. The sales man

Product

A
B

He also estimates that the following additional sales are possible with the help of an intensi

Product

A
B

You are required to prepare the sales budget for the next year, i.e., 2024-25 based on the sa

Solution

Workings: Calculation of budgeted estimates of sales for 2024-25

Market X (units)
Product A: Actual for the year 2023-24 5,000
Add: Increase of 10 % and 5% for X & Y 500
Add: Increase due to advt. campaign (as given) 500
Total 6,000
Product B: Actuals for current year 2023-24 2,000
 Add: Increase of 20% and 10% for X & Y 400
Add: Increase due to advt. campaign 600
Total 3,000

Sales Budgets for the Year 202

Product Market X
Unit Price (Rs.)
A 6,000 10
B 3,000 40
9,000
 blems taken from Management Accounting Book by Prof. Surender Singh)

actures two types of product A and B and sells them in X and Y markets. The following information is

Budgeted Price Actual Price

Quantity (Rs.) Quantity (Rs.)
4,000 9 5,000 9
3,000 41 2,000 41
6,000 9 7,000 9
5,000 41 4,000 41

A is very popular but at the same time underpriced. It is estimated that it will also continue to find a
n the other hand, product B is over-priced and it can bring more sales if price is reduced to Rs.40. The
he above price changes. The sales manager has made the following estimates:

% increase in sales over

current year's actuals
Market X Market Y
10 5
20 10

are possible with the help of an intensive advertisement campaign.

Market X Market Y
(Units) (Units)
500 650
600 600

next year, i.e., 2024-25 based on the sales managers estimates both in quantitative and monetary terms.

sales for 2024-25

Y (units)
7,000
350
650
8,000
4,000
 400
600
5,000

Sales Budgets for the Year 2024-25

Market Y Total
Value (Rs.) Unit Price (Rs.) Value (Rs.) Unit Price (Rs.) Value (Rs.)
60000 8,000 10 80000 14,000 140000
120000 5,000 40 200000 8,000 320000
180000 13,000 280000 22,000 460000
alue (Rs.)
II Production & Production Cost Budget:
Problem 2. (Example 2. Page 2.13) SR manufacturing company submits the following figures for your considerations.

.
Product A
Actuals for 4th Quarter of 2023-24:
Sales (units): January 10,000
February 8,000
March 12,000
Selling price per units (Rs.) 20
Estimates for 4th Quarter of 2024-25:
Increase in sales Quantity 10%
Increase in selling price 25%
Opening stock as on Jan. 1, 2025 (% of month's sales) 50%
Closing stock for January and February,2025 (% of subsequent month's sale) 50%
Stock position on 31st March 2025(units) 6,000
You are required to prepare the sales and the production budgets for the 4th quarter of 2024-25

Solution:
Working : Calculation of Budgeted Estimate of Sales (Quantitative) for 4th Quarter of 2024-25
Product A
Particulars
Actual sales for the last year
Add: 10% increase in sales
Total
Product B:
Particulars
Actual sales for the last year
Add: 20% increase in sales
Total

Sales Budget for the 4th Quarter ending 31st March 2025
Product A
Month Unit Price (Rs.)
January 11,000 25
 February 8,800 25
March 13,200 25
Total 33,000 25

Production Budget for 4th Quarter ending on 31st March 2025 (Units)
Particulars January
Product A Budgeted Sales 11,000
Add :Desired closing stock (50% of Subsequent month's sale and 6,000 units as on 31st March, 2025) 4400
15,400
Less: Opening stock (50% of month's sales as on January 1, 2025) 5500
Production 9,900
Product B Budgeted Sales 14,400
Add :Desired closing stock (50% of Subsequent month's sale and 6,000 units as on 31st March, 2025) 6000
20,400
Less: Opening stock (50% of month's sales as on January 1, 2025) 7200
Production 13,200
 Product B

12,000
10,000
14,000
40

20%
10%
50%
50%
8,000

January February March

10,000 8,000 12,000
1000 800 1200
11,000 8,800 13,200

January February March

12,000 10,000 14,000
2400 2000 2800
14,400 12,000 16,800

ng 31st March 2025

Product B Total
Value (Rs.) Unit Price (Rs.) Price (Rs.) Value (Rs.)
275000 14,400 44 908600
 275000 12,000 44 803000
275000 16,800 44 1014200
275000 43,200 44 2725800

For Whole
February March
Quarter
8,800 13,200 33,000
6600 6000 6000
15,400 19,200 39,000
4400 6600 5500
11,000 12,600 33,500
12,000 16,800 43,200
8400 8000 8000
20,400 24,800 51,200
6000 8400 7200
14,400 16,400 44,000
III Production & Production Cost Budget:
Problem 3. (Example 3 Page 2.15) XYZ Co. Ltd. has prepared the following estimates of sales in units for the 3rd and 4th Quarter of accounti
Month Units
October, 2024 4,000
November, 2024 4,000
December, 2024 5,000
January, 2025 5,600
February, 2025 6,000
March, 2025 6,800
April, 2025 7,600
There will be no work in progress at the end of the month. The company has a policy of maintaining closing finished goods stock equal to 25%
the end of every month. This policy is also expected to be followed for closing stock as on 30th September, 2024. The budgeted production and
31st March, 2025 are given as follows:
Annual Production (Units) 60,000
Direct Material cost Per unit Rs.15
Direct Labour cost per unit Rs.10
Annual Factory Overhead to be apportioned to production Rs.3,00,000
You are required to prepare production budget and production cost budget for the six months ending 31st March, 2025.

Solution: Production budget (units) for the half year ending 31st March, 2025
2024 2025
October November December January February March
Budgeted Sales 4,000 4,000 5,000 5,600 6,000 6,800
Add: Closing stock (25% of 1000 1250 1400 1500 1700 1900
next month's sale)
Less: Opening stock 1000 1000 1250 1400 1500 1700
Production 4,000 4,250 5,150 5,700 6,200 7,000

Production Cost Budget (Rs.) at Production Level of 32,300 units

Particulars Per Unit (Rs.) Total (Rs.)
Direct Material 15 484500
Direct Wages 10 323000
Factory overheads
5 161500
(3,00,000/60,000)
Cost of Production 30 969000
nd 4th Quarter of accounting period 2024-25

goods stock equal to 25% of the next month's sale at

e budgeted production and cost for the year ending

5.

For the whole Working Notes:

half year April Sales
31,400 7600
1900
1900
1700
32,300
IV Material Purchase Budget:
Problem 4. Illustration 5.Page 2.44) Mehra Food Products Ltd. has
first five months of 2025

Month
Sales January
Budget (in 10,500
Units)
The inventory of finished products at the end of every month is to be
month. In January 2025, it is estimated that there will be 3,700 units
progress at the end of any month
Every unit of product requires two types of materials in the following
Material A: 4 kg.
Material B: 5 kg.

Materials equal to one half of the next month’s production are to be i

requirement is expected to be met on 1st January, 2025. Budgeted pr
Material A: Rs.5 per kg.
Material B: Rs.4 per kg.

Prepare: (i) Production Budget from January to April, 2025.

(ii) Material purchase budget (in units and cost) from January

Solution
(i) Production Budget (units) from January to April, 2025

January February March

Sales (in units) 10,500 15,000 12,000
Add: Desired closing stock (25% of
3750 3000 2700
next’s month estimated sales)
Total 14,250 18,000 14,700
Less: Opening Stock 3700 3750 3000
Production 10,550 14,250 11,700

Raw Material Purchase Budget for the Ist Quarter of 2025

(ii) (Product A)
January February
Production
Consumption
Add: Desired(units)
of material
closing @4
stock 10,550 14,250
kg. p.u(50% of estimated
(Kg.) 42200 57000
consumption of next month) 28500 23400
less: Opening
Purchase Stock
of raw material 21100 28500
(Kg.) 49600 51900
Total Cost @ Rs 5 248000 259500
 Raw Material Purchase Budget for the Ist Quarter of 2025
(iii) (Product B)
January February
Production
Consumption
Add: Desired(units)
of material
closing @
stock 10,550 14,250
Rs.5 kg.
(Kg.) p.uof estimated
(50% 52750 71250
consumption of next month) 35625 29250
less: Opening Stock 26375 35625
Purchase of raw material
62000 64875
(Kg.)
Total Purchase Cost @ Rs 4 248000 259500
 Food Products Ltd. has prepared the following sales budget for the

February March April May

15,000 12,000 10,800 10,500

of every month is to be equal to 25% of the sales estimate for the next
here will be 3,700 units of product on hand. There will be no work in

materials in the following quantities:

’s production are to be in hand at the end of the every month. This

uary, 2025. Budgeted prices for the purchase of materials are:

to April, 2025.
s and cost) from January to March, 2025.

uary to April, 2025 Working Notes:

April May
10,800 10500
2625
13,425
2700
10,725

e Ist Quarter of 2025

March April
11,700 10,725
46800 42900
21450
23400
44850
224250
e Ist Quarter of 2025

March April
11,700 10,725
58500 53625
26812.5
29250
56062.5
224250
V Sales Overhead Budget:
Problem 5. (Example 7. Page 2.21) From the information given below, prepare the sales overhead budget for the quarter
ending 31st December, 2024
Rs.
Advertisement 1250000
Salaries of Sales Department 1750000
Expenses of Sales Department 350000

Salaries of Counter Salesmen 2400000

Salaries of Travelling Salesmen 1200000

Counter salesmen are entitled to a commission at 2% of sales executed by them. Travelling salesmen are to be paid a
commission of 5% on the sales effected through them and a further 5% towards expenses.

Details of the Sales (Rs.)

Sales by
Sales Zones Sales at counter Travelling Total Estimated
A 1,20,00,000 Salesman
30,00,000 1,50,00,000
B 90,00,000 60,00,000 1,50,00,000
C 80,00,000 80,00,000 1,60,00,000
D 60,00,000 1,00,00,000 1,60,00,000
3,50,00,000 2,70,00,000 6,20,00,000

Solution
Sales Overhead Budget for the period ending 31st December 2024

Sales Zones A B C D Total

Counter's sales 12,000,000.00 9,000,000.00 8,000,000.00 6,000,000.00 35,000,000.00
Sales by Travelling salesman 3,000,000.00 6,000,000.00 8,000,000.00 10,000,000.00 27,000,000.00
Total Sales 15,000,000.00 15,000,000.00 16,000,000.00 16,000,000.00 62,000,000.00

Variable Overheads
Counter Salesmen Commission
240,000.00 180,000.00 160,000.00 120,000.00 700,000.00
at 2%
Travelling Salesmen
150,000.00 300,000.00 400,000.00 500,000.00 1,350,000.00
Commission @ 5%
Travelling Salesmen Expenses
150,000.00 300,000.00 400,000.00 500,000.00 1,350,000.00
@ 5%
Total Variable Overhead (A) 540,000.00 780,000.00 960,000.00 1,120,000.00 3,400,000.00
Fixed Overheads:
Advertisement 1,250,000.00
Salaries of Sales Dept. 1,750,000.00
Expenses of Sales Dept. 350,000.00
Salaries of Counter Salesmen 2,400,000.00
Salaries of Travelling Salesmen 1,200,000.00
Total Fixed Overheads (B) 6,950,000.00
Total Sales Overhead (A+B) 10,350,000.00
budget for the quarter

n are to be paid a
VI Cash Budget:
Problem 6. (Example 8. Page 2.23) The following data relate to Cosmos Ltd. The financial manager has made the following sa
forecasts for the first five months of the coming year, commencing from 1st April, 2025.

Month Sales (Rs)

April 40,000
May 45,000
June 55,000
July 60,000
August 50,000

Other data:
(i) Debtors’ and creditors’ balances at the beginning of the year are 30,000 and 14,000 respectively. The balances of other relevan
assets and liabilities are :.
Cash Balance 7,500
Stock 51,000
Accrued sales
3,500
commission
(i) 40 percent sales are on cash basis. Credit sales are collected in the month following the sale.
(ii) Cost of sales is 60 percent on sales.
(iii) The only other variable cost is a 5 percent commission to sale agents. The sales commission is paid in a month after it is
earned.
(iv) Inventory (Stock) is kept equal to sales requirements for the next two months budgeted sales.
(v) Trade creditors are paid in the following month after purchases.
(vi) Fixed costs are 5,000 per month including 2,000 depreciation
You are required to prepare a cash budget for the months of April, May and June 2025 respectively

Solution
(i)

Cash Budget for the Period from April-June, 2025

Particulars April May June For Whole Quarter

Opening Balance (A) 7,500 33,000 37,000 7,500
Receipts:
Cash Sales 16000 18000 22000 56000
Collection from debtors 30000 24000 27000 81000
Total Cash
Total Receipts (B)
Available 46000 42000 49000 137000 (ii)
(A+B) 53,500 75,000 86,000 144,500

Payments (C):

Payments to Creditors 14000 33,000 36,000 83000

Sales Commission (5% of
3500 2000 2250 7750
previous month's sales)
Fixed Costs (5,000-2,000) 3,000 3,000 3,000 9,000
Total Payments (C) (A+B-
Cash Balance 20,500 38,000 41,250 99,750
C) 33,000 37,000 44,750 44,750
 manager has made the following sales

pectively. The balances of other relevant

e sale.

ssion is paid in a month after it is

d sales.

Working Notes
Given:
Month Sales

April 40,000
May 45,000
June 55,000
 July 60,000
August 50,000

Payment of creditors
Particulars April May June
Desired ending inventory,
60% of sales of next two 60000 69000 66000
months (Cost of sales )
Add: Cost of sales of
24000 27000 33000
current month's sale
Total finished goods
84,000 96,000 99,000
requirement
Less: Opening stock 51,000 60,000 69,000
Purchases 33,000 36,000 30,000
Payment to creditors (Lag
14,000 33,000 36,000
period –1 month)
VII Fixed & Flexible Budget:
Problem 7. (Example 12 . Page 2.31): ABC Company Ltd. is currently working at 50% capacity and produces 10,000 units.
At 60% working, raw material cost increases by 2% and selling price falls by 2%. At 80% working, raw material cost
increases by 5% and selling price falls by 5%. At 50% capacity working, the product costsRs.180 per unit and sold atRs.200
per unit. The unit cost ofRs.180 is made up as follows:
Rs.
Materials 100
Wages 30
Factory overheads (40% fixed) 30
Administration, selling and distribution (50%
20
Variable)
You are required to prepare a flexible budget showing the estimate of profit when business operates at 60% and 80%
capacity.
Solution
Statement of Flexible budget

Capacity 50% 60% 80%

Production
10,000 12,000 16,000
(units)
Price p.u.(RsTotal (Rs.) Price p.u.(Rs.)Total (Rs.) Price p.u.(Rs.) Total (Rs.)
Selling Price 200 2000000 196.00 2352000 190 3040000
Material 100 1000000 102 1224000 105 1680000
Labour 30 300000 30 360000 30 480000
Prime Cost 130 1300000 132 1584000 135 2160000
Factory Overheads:
Variable 18 180000 18 216000 18 288000
Fixed 12 120000 10 120000 7.5 120000
Total Factory
30
Overheads: 300000 28 336000 25.5 408000
Admn. Selling and Dist.O/H:
Variable 10 100000 10 120000 10 160000
Fixed 10 100000 8.333333333 100000 6.25 100000
Total Admn.
Selling and 20 200000 18.33333333 220000 16.25 260000
Dist.O/H:
Total Cost 180 1800000 178.3333333 2140000 176.75 2828000
Profit 20 200000 17.67 212000 13.25 212000
roduces 10,000 units.
material cost
nit and sold atRs.200

0% and 80%

Total (Rs.)
Fixed & Flexible Budget:
Problem 8. (Illustration 20 Page2.62) . The budget manager of Sunflower Ltd. is preparing f
accounting year starting from April 1, 2022. The company produces one product namely SFII.
Rs.14 per unit.
Direct labour averagesRs.5 per hour and requires 1.6 hours to produce one unit of SFII. Salesm
commission of Rs.2 per unit sold. Fixed selling and administrative expenses amount to Rs. 1,7
Manufacturing overhead is estimated in the following amounts under specified volumes :
Volume of production in units 1,20,000 1,50
Expenses (Rs.) (R
Indirect material 5,28,000 6,60
Indirect labour 3,00,000 3,75
Inspection 1,80,000 2,25
Maintenance 1,68,000 2,04
Supervision 3,96,000 4,68
Depreciation of plant and equipment 1,80,000 1,8
Engineering services 1,88,000 1,8
Total manufacturing overhead 19,40,000 23,0

Prepare a total cost budget for 1,40,000 units of production.

Solution

Flexible Budget at an activity level of 1,40,000 units (Rs.)

Sales/Production (units)
A. Variable cost:
Direct Materials
Direct Wages
Indirect Wages
Indirect Wages
Inspection
Salesman Commission
Total Variable Cost (A)
B. Semi-variable cost:
Maintenance:
Variable 168000
Fixed 24000
Supervision
Variable 336000
Fixed 108000
Total Semi-Variable Cost (B)
C.Fixed Costs
Depreciation 180000
Insurance 188000
Administration & Selling Expenses 170000
Total Cost (A + B + C)
unflower Ltd. is preparing flexible budget for the
s one product namely SFII. Direct material costs

uce one unit of SFII. Salesmen are paid a

expenses amount to Rs. 1,70,000 per year.
er specified volumes :
20,000 1,50,000
Rs.) (Rs)
28,000 6,60,000
0,000 3,75,000
0,000 2,25,000
8,000 2,04,000
6,000 4,68,000
,80,000 1,80,000
88,000 1,88,000
40,000 23,00,000

ts (Rs.) Working Notes:

140000 Segregation of semi-variable cost into fixed and variable portions

Portion of variable cost (per unit) = Change in the amount of semi - variabl
1960000 Fixed cost portion = Semi-variable costs – (Variable cost per unit × No. of u
1120000 Rs.
616000 Indirect material
350000 Portion of variable cost (per unit) 4.4
210000 Fixed cost portion 0
280000
4536000 Indirect wages
Portion of variable cost (per unit) 2.5
Fixed cost portion 0

192000 Inspection
Portion of variable cost (per unit) 1.5
Fixed cost portion 0
444000
636000 Maintenance
Portion of variable cost (per unit) 1.2
Fixed cost portion 24000
538000 Supervision
5710000 Portion of variable cost (per unit) 2.4
Fixed cost portion 108000
Alternate Working
At 120000 units
Change Total Total
Level of Activity 120000 150000 30000 VCp.u. Variable Fixed
Indirect Material 528000 660000 132000 4.4 528000 0
Indirect Labour 300000 375000 75000 2.5 300000 0
Inspection 180000 225000 45000 1.5 180000 0
Maintenance 168000 204000 36000 1.2 144000 24000
Supervision 396000 468000 72000 2.4 288000 108000
 variable portions
the amount of semi - variable costs/ Change in output
iable cost per unit × No. of units)
Flexible Budget/Revision of Budget
Problem 9. (Example 14 Page2.33) The Managing Director of XYZ Co. Ltd. has been given the followin
Budgeted Actual Variance
Units Produced and
10,000 9,000 -1,000
Sold
Sales 80,000 70,000 -10,000
Direct Materials 20,000 18,400 1,600
Direct Wages 30,000 26,224 3,776
Variable Overheads 10,000 9,328 672
Fixed Overheads 10,000 9,900 100
Total Cost 70,000 63,852 6,148
Profit 10,000 6,148 3,852
Note : Figures in the bracket indicates adverse variances
Is the calculation of variances correct? If not, then prepare a flexible budget for the month and compare w

Solution Statement of Flexible Budget and its Comparison with Actual results

Flexible Budget Actual Variance

Units Produced and Sold 9,000 9,000 Nil
Rs. Rs. Rs.
Sales 72000 70,000 -2,000
Direct materials 18000 18,400 400
Direct wages 27000 26,224 -776
Variable overheads 9000 9,328 328
Fixed overheads 10,000 9,900 -100
Total Cost 64000 63,852 -148
Profit 8000 6,148 -1,852
 d. has been given the following statement showing the results for a particular month:

for the month and compare with the actual results.

on with Actual results

Flexible Budget Solution
60%
Prepare flexible budget at 60% Variable O/H
50% Variable O/H Indirect Material 6000
70% Indirect Material 6000 Indirect Labour 18000
85% Indirect Labour 18000 Semi V O/H
90% Semi V O/H Electricity
100% Electricity (40% F) 30000 Fixed 0.4 12000
Repairs (80% F) 3000 Variable 0.6 18000
Fixed O/H Repairs
Depreciation 16500 Fixed 0.8 2400
Insurance 4500 Variable 0.2 600
Salaries 15000 Fixed O/H
Depreciation 16500
Total O/H 93000 Insurance 4500
Salaries 15000

Total O/H 93000

 50% 70% 85% 90% 100%

5000 7000 8500 9000 10000

15000 21000 25500 27000 30000

12000 12000 12000 12000 12000

15000 21000 25500 27000 30000

2400 2400 2400 2400 2400

500 700 850 900 1000

16500 16500 16500 16500 16500

4500 4500 4500 4500 4500
15000 15000 15000 15000 15000

85900 100100 110750 114300 121400