ACCA · Question 36 · Budgeting

Section B - Multi-Task Question 1 (Budgeting)

Scenario: SolarFlare Energy is a renewable energy startup preparing its master budget for Quarter 3.

Data:

• Expected sales: July 5,000 units; August 6,000 units; September 7,500 units.
• Closing inventory policy: 20% of the next month's sales demand.
• Opening inventory for July is exactly 20% of July's sales.
• Each unit requires 3 kg of raw material 'Silica'.
• Silica costs $4 per kg.
• The company pays for 60% of materials in the month of purchase and 40% in the following month.

This MTQ contains 5 sub-tasks worth 2 marks each.

Task 1: Calculate the budgeted production units for August.
Task 2: Calculate the total kg of Silica required for production in July.
Task 3: If August production is 6,300 units, calculate the budgeted material purchases cost ($) for August.
Task 4: Explain the primary purpose of a cash budget in this startup context.
Task 5: If actual sales in July were 5,500 units, and the original fixed budget for marketing was $10,000 plus $2 per unit sold, calculate the flexed budget for marketing in July.