Budgeting Questions and Answers Grade 12

Amount never collected = 135 000 - (\(101\ 250 + 29\ 700\)) = R4 050

\(4\ 050 \div 135\ 000 \times 100\)

\(3\%\)

The two items wrongly recorded in the cash budget are:

1. Discount received.
2. Depreciation.

Reason: neither involves an actual cash receipt or payment, so they do not affect the cash flow.

Cash sales are \(60\%\) of total sales: \(450\ 000 \times \frac{60}{100}\)

R270 000

September interest R900 = deposit x \(9\% \times \frac{1}{12}\), so the deposit = \(900 \times \frac{12}{9} \times 100 = \text{R}120\ 000\).

After R40 000 matured: \(120\ 000 - 40\ 000 = \text{R}80\ 000\)

October interest = \(80\ 000 \times 9\% \times \frac{1}{12}\)

R600

Creditors are paid two months later, so October pays for August purchases. August cost of sales = \(330\ 000 \times \frac{100}{150} = \text{R}220\ 000\) (stock is replaced each month, so purchases equal cost of sales).

\(220\ 000 \times 95\%\) (\(5\%\) discount)

R209 000

September fees \(\frac{\text{R}216\ 000}{3}\) directors = R72 000 each.

Two directors with \(15\%\) increase: \(216\ 000 \times \frac{2}{3} \times \frac{115}{100} = \text{R}165\ 600\)

New director: \(216\ 000 \times \frac{1}{3} = \text{R}72\ 000\)

\(165\ 600 + 72\ 000 = \text{R}237\ 600\)

The benefit to each party is:

1. Business: sales were R306 000 (\(60\%\)) above the budget (R816 000 against R510 000).
2. Salespersons: although salaries dropped from R80 000 to R22 000, they earned R95 200 in commission, so their total of R117 200 is R37 200 (\(46{,}5\%\)) more than the budgeted salaries.

The two strategies were:

1. More advertising: R54 000 was spent against a budget of R36 000 (R18 000 or \(50\%\) more).
2. Delivery to customers: R23 000 was spent on delivery although nothing was budgeted.

Sales were \(60\%\) above budget, while packing material was only \(25\%\) above budget, so the extra spending is justified by the extra sales. Also, packing material was budgeted at \(5{,}8\%\) of sales (\(\frac{29\ 532}{510\ 000}\)) but the actual was only \(4{,}5\%\) of sales (\(\frac{36\ 915}{816\ 000}\)), so it was used more efficiently.

Spending was below the budget, which saves money now, but too little maintenance may let equipment deteriorate, causing costly repairs, breakdowns or replacement later.