Q.1.A.

From the estimates of income and expenditure, prepare cash budget for the months
from April to June.

1. Plant worth Rs. 20,000 purchase in June 25% payable immediately and the remaining in
two equal instalments in the subsequent months
2. Advance payment of tax payable in Jan and April Rs 6,000
3. Period of credit allowed
 By suppliers 2 months
 To customers 1 month
4. Dividend payable Rs.10,000 in the month of June
5. Delay in payment of wages and office expenses 1 month and selling expenses ½ month.
Expected cash balance on 1st April is Rs. 40,000.

Q.1.B. From the following information prepare a monthly cash budget for the three months
ending 31st Dec.2019.

Admin &
Sales Materials Wages Production Selling
Month (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)

June 3,000 1,800 650 225 160

July 3,250 2,000 750 225 160

Aug. 3,500 2,400 750 250 175

Sep. 3,750 2,250 750 300 175

Oct. 4,000 2,300 800 300 200

Nov. 4,250 2,500 900 350 200

Dec. 4,500 2,600 1,000 350 225

(i) Credit terms are:

(a) Sales — 3 months to debtors. 10% of sales are on cash. On an average, 50% of credit
sales are paid on the due dates while the other 50% are paid in the month following
(b) Creditors for material — 2 months.
(ii) Lag in payment:
Wages. 1/4 month, overheads — 1/2 month.
(iii) Cash and Bank Balance on 31st Oct. expected Rs. 1,500.
(iv) Other information
(a) Plant and Machinery to be installed in Aug. at a cost of Rs. 24,000. It will be paid for by
monthly instalments of Rs. 5,000 each from 1st Oct.;
(b) Preference share dividend @ 5% on Rs. 50,000 are to be paid on 1st Dec.
(c) Calls on 250 equity shares @ Rs. 2 per share expected on 1st November
(d) Dividends from investments amounting to Rs. 250 are expected on 31st Dec.
(e) Income tax (advance) to be paid in December Rs. 500.

Q.2.A M & Co. Has 3 production departments and 2 service departments. The expenses are
as given below.

Expenses Amount (Rs.)

Consumable stores 15,400
Supervision 22,800
Rent and rates 10,000
Insurance 2,000
Depreciation 30,000
Power 9,000
Light & Heat 4,000
The Following information is available:

Basis Machine Assembly Finishing Stores Repairs &

Shop shop dept Maint.
Direct Materials 34% 39% 13% 4% 10%
Direct Wages 35% 22% 27% 10% 7%
Area (sq.ft.) 5,250 3,500 4,375 1,750 2,625
Asset Value 2,00,000 2,25,000 50,000 12,500 12,500
H.P. x Hours x LF 10,800 7,200
a) Prepare the Primary Distribution Statement using the most appropriate basis for
apportionment.
b) The Machine shop, Assembly shop and Finishing Departments have issued Stores
requisition in the ratio 9:6:5 and Repairs request in the Ratio 2:3:1. Prepare the
Secondary distribution statement on non-reciprocal (direct distribution) basis.

Q.2.B Compute the machine hour rate from the following data:

Amount
Cost of Machine 1,00,000
Installation Charges 10,000
Estimated scrap value after the expiry of its life (15 years) 5,000
Rent and Rates for the shop per month 200
General lighting for the shop per month 300
Insurance premium for the machine per annum 960
Repairs and Maintenance expense per annum 1,000
Power Consumption- 10 units per hour -
Rate of power per 100 units 20
Estimated working hours per annum-2,200 -
(This includes non-productive set up time of 200 hours)
Shop supervisor’s salary per month 600

The Machine occupies 1/4th of the total area of the shop. The Supervisor is expected to
devote 1/5th of his time for supervising the machine.