The results of their labours are as follows Estimated Production Data Estimated selling price per cog mechanism

Estimated materials usage per cog mechanism Estimated cost of materials per kilo Estimated production wages and variable overheads per cog mechanism Estimated fixed overheads per month July Estimated sales of cog mechanisms Estimated production of cog mechanisms Estimated purchases of raw materials (kilos) Purchase of New equipment Brenda has decided that the new equipment will be delivered in July and paid for in August. She has made arrangements for the company to issue 10% debentures to the value of 130000 to be repaid in the year 2007. Interest on the debentures will be paid by two six-monthly instalments, in arrears. 130000 will be credited to the companys bank account on 1st August 2000. Depreciation July to October Buildings Machinery Vehicles Credit terms All sales are on credit and two months credit is allowed. All purchases of raw materials are on credit and are paid for one month following purchase. Wages, variable and fixed overheads are paid in the month in which they are incurred. 333 15200 (includes depreciation on new equipment) 5400 110 100 100 Aug 115 120 110 Sept 110 110 100 250 one kilogram 45 65 3000 Oct 80 70 60

Proposed dividend Since Brenda will make a considerable investment in purchasing the business, she intends to propose a dividend of 5% October 2000. APPENDIX 1 Budgeted Balance Sheet of Endeavour Twoplise Limited as at 30th June 2000. Cost () Fixed Assets Land &buildings Machinery & equipment Motor vehicles Current Assets Stock of raw materials (100 kilos) Stock of finished goods (110 cogs) Debtors (May: 5900, June: 13100) 4500 12100 19000 35600 Creditors (amounts due within one year) Trade creditors for raw materials Bank overdraft 3900 17250 21150 Capital and Reserves Ordinary share capital (1 shares) Retained profits 100000 56450 156450 Note: finished good stocks are valued at marginal cost for budget purposes 120000 50000 52000 20000 44000 16000 100000 6000 36000 Depreciation to date() NBV()

Question 1 a) From the information which Brenda and Andy have provided, calculate the closing stock of raw materials and finished goods and present the raw materials budget and the finished goods budget for each month from July 2000 to October 2000 inclusive. Your answers should be expressed in either kilograms or cogs, as appropriate. b) Calculate and present the sales revenue budget and production cost budget for each month from July 2000 to October 2000 inclusive, and identify the budgeted closing debtors, budgeted closing creditors and budgeted closing stock values at 30 th June 2000. c) Prepare and present the cash budget for each month July to October 2000 inclusive. Question 2 Brenda has decided that now the budget has been constructed, she can use it for monitoring and controlling purposes. However, she needs to explain to Andy how this can be done so that he can undertake the necessary tasks involved. Write a memo to Andy from Brenda which: a) Explain how Brenda intends to use the budget to monitor and control the companys activities and identifies the tasks which Brenda might require Andy to undertake in implementing the process b) Explain how she might use a responsibility accounting approach and identifies some of the problems that she might encounter in doing so. Question 3 It is now October 2000 and Brenda, who has become more confident at planning ahead for the business, has produced a budget for the next twelve months trading to October 2001. This highlights a period of 35 per cent spare capacity from November 2000 to January 2001 inclusive. She has established that for an extra investment of 35000, she could buy equipment which is more flexible than the newly purchased plant, in that it can be used to produce cog mechanisms of a slightly different design, in addition to the current cog mechanism. These slightly different cog mechanisms are suitable for use in automated waste collection vehicles.

Identify the types of information which Brenda would need to consider in making a decision to purchase the additional equipment, the likely sources information and any other factors which you feel she should consider. Question 4 From the information provided by Brenda and Andy, prepare a budgeted trading and loss account for the four months to 31st October 2000 and a budgeted balance sheet as at 31st October 2000. Ignore taxation.