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ACCA · Question 36 · Budgeting
SECTION B - MULTI-TASK QUESTION 1 (BUDGETING)
A renewable energy startup is preparing its budgets for Q3.
Data:
- Budgeted sales: July 1,000 units, August 1,200 units, September 1,500 units.
- Selling price: $200 per unit.
- Sales are 20% cash and 80% credit (paid 1 month after sale).
- June credit sales were $150,000.
- Variable production cost: $100 per unit.
- Fixed production overheads: $50,000 per month.
Provide the following 5 answers (each worth 2 marks):
- Calculate total sales revenue budgeted for August.
- Calculate cash receipts from credit customers in July.
- Calculate total cash receipts in August.
- If actual production in August is 1,300 units, calculate the flexed variable production cost allowance.
- Calculate the total flexed budget allowance (variable + fixed) for August based on 1,300 units.
SECTION B - MULTI-TASK QUESTION 1 (BUDGETING)
A renewable energy startup is preparing its budgets for Q3.
Data:
- Budgeted sales: July 1,000 units, August 1,200 units, September 1,500 units.
- Selling price: $200 per unit.
- Sales are 20% cash and 80% credit (paid 1 month after sale).
- June credit sales were $150,000.
- Variable production cost: $100 per unit.
- Fixed production overheads: $50,000 per month.
Provide the following 5 answers (each worth 2 marks):
- Calculate total sales revenue budgeted for August.
- Calculate cash receipts from credit customers in July.
- Calculate total cash receipts in August.
- If actual production in August is 1,300 units, calculate the flexed variable production cost allowance.
- Calculate the total flexed budget allowance (variable + fixed) for August based on 1,300 units.
How to approach this question
Work through each sub-requirement systematically using the provided data.
Full Answer
1. August Sales Revenue = 1,200 units × $200 = $240,000.
2. July receipts from credit customers = June credit sales = $150,000.
3. August total receipts = Cash sales in Aug (20% of $240,000 = $48,000) + Credit receipts from July (80% of July sales [1,000 × $200 = $200,000] = $160,000). Total = $48,000 + $160,000 = $208,000.
4. Flexed variable cost = Actual units × Variable cost per unit = 1,300 × $100 = $130,000.
5. Total flexed budget = Flexed variable cost + Fixed overheads = $130,000 + $50,000 = $180,000.
Common mistakes
Confusing sales revenue with cash receipts, or flexing the fixed costs.
Practice the full ACCA MA — Management Accounting Practice Exam 4
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