Question 1 (60 marks)

  1. R Limited manufactures three products: A, B and C. You are required:
  • Using the information given below, to prepare budgets for the month of January for:
    1. Sales in quantity and value, including total value (10 marks)
    2. Production quantities (15 marks)
  • Material usage in quantity (10 marks)
  1. Material purchases in quantity and value, including total value (15 marks) 
  • Give and explain 4 benefits of budgeting (10 marks) 

Data for Preparation of January Budgets

  Product Quantity Price each ($)
Sales: A 1,000 100
  B 2,000 120
  C 1,500 140


Materials used in the company’s products are:-


Unit cost








Quantities used in:







Product: A   4   2  
B   3   3   2
C   2   1   1

Finished stocks:

Products Quantities

1st January










31st January 1,100 1,650   550








1st January 26,000 20,000 12,000
31st January 31,200 24,000 14,400

Question 2 (40 marks)

Detail of product Z (to be launched in next year)

January (Unit)

February (Unit)

March (Unit)

April         May

(Unit)        (units)

Sales                                               1,000             1,200             1,400               1,600      1,800

Notes: Unit selling price = $20 Purchase price = $12

Other information:

  • Closing stock to be maintained sufficient for 20% of the following month’s sales
  • All sales in credit in which 40% to be received in 1 months 55% in 2 months time and the rest to be treated as bad
  • About 60% of creditors to be settled in 1 month time which entitled for 5% cash discount and the rest in two months (Purchases made in the month of production)
  • Monthly overhead estimated at $500 for the first two months thereafter will be increased by 20%. Overhead payable one month in
  • Monthly salary estimated at $800 and payable in the month of
  • Machinery costing $6,000 to be acquired in January and 10% of payment made immediately with the remaining amount settled by two equal instalments in the following Company’s policy is to provide depreciation at 20% on cost.
  • A monthly loan repayment of $1,000 will be paid in which $120 is
  • Dividend of $15,000 will be paid in March
  • The bank balance at 1 January is $3,000 positive


Prepare a monthly cash budget for each of the four months to 30 April (ie for January, February, March and April), showing the cash balance at the end of each month. (40 marks)

Answers to Above Questions on Budgetary Control

The preparation of budgets for R Limited for its three products A, B and C is performed as follows:


Get completed answers on budgetary questions above from the accounting experts of Student Life Saviour Malaysia.

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