Ozgur Celik

Question 1
Problems with setting up Sales Budget:
The sales budget can lead to inflexibility in decision making and needs to
be changed as a circumstance change. Creating a sales budget is a time
consuming process therefore it could have un-realistic information that will
add to de-motivation. The sales budget could be inaccurate or
unreasonable assumptions which can quickly turn into a unrealistic
budget. It would also be difficult to develop an accurate sales budget, so it
would have to be estimated on a quarterly basis. When this happens, all
other budgets would have to be revised from the sales figures would could
also take up too much time.
Problems with setting up a Production Budget:
Production budget is not translating its production requirements into
pounds sterling. It is just dealing with unit volumes and cannot estimate
the quantities of every product. In order to change this into pounds
sterling, the production budget would have to be moved into different
parts such as direct labour budget and direct materials budget.

Question 2

i.
ii.
iii.
iv.

4000
A) 3000= 27000 B) 8000=54000
A) 2000=18000 B) 9000 = 81000
A) 1000 = LOSS B)10000 = PROFIT C) 4000 = BREAK-EVEN POINT
Advantages:
It can help the company to determine which products to develop
and which to table. Performing a break-even analysis can help to
calculate as accurately as possible and control them by detecting
unusual and unnoticed costs. Another advantage would be the
analysis provides a structured behaviour of profits in relation to the
output. It helps the planning of the company.
Disadvantages:
This is only done to analyse one product at a time which could take
a long period of time to analyse every product. It is difficult
to classify all variables or all fixed costs and if the income functions
change during the analysis. In the break-even chart, the selling
prices would have frequent changes that would effect the analysis

Ozgur Celik
to be unreliable and the relationship of the ouput and costs will
become obsolete very quickly.
Question 3
Nothing changed because the total cost per item is still the same
and all other cost reduced at the same time by 5%. This would
happen because if the output catches up with the fixed cost while
the fixed cost is decreasing, it will allow the fixed cost to spread.
Question 5
September

In September the company received 101,280 but the total

payments were 204,000, because of the 10,000 balance before the
company was in 92,720 in debt.

October

The sales went up to 124,720 and the payments went down to

148,000 but because of the debts from last month, their debts went
up to 116,000.

November

In November, the sales have increased to 183,360 and the

expenses have dropped down to 142,000. The sales were more than
the payments. This has helped the company to pay off their debts
from the last two months but there still were 74,640 in debt.

December

In December, the total receipts were very good. They made 214,240
and had only 130,000 of payments. The company could pay off the
debts from the last months and also made a profit of 9,600.

3. Recommend alternative course of actions

The company could use to improve its cash flow position. The company need to
control their expenses.