- 15 Marks
MA – L2 – Q14 – Budgetary control
Prepare a budgeted profit or loss statement for Mampong Delivery Co. for Year 2, considering revenue, salaries, fuel, and operational costs.
Question
A company operating out of Mampong provides three types of delivery service to customers: service A, service B, and service C. Customers are a mix of firms with a contract for service with the company, and non-contract customers.
The following information relates to performance in the year to 31st December Year 1:
| Service A | Service B | Service C | |
|---|---|---|---|
| Number of deliveries made | 350,000 | 250,000 | 20,000 |
| % of deliveries to contract customers | 60% | 60% | 80% |
| Price charged per delivery: | |||
| Contract customers | GH¢9 | GH¢15 | GH¢300 |
| Premium for non-contract customers | +30% | +50% | +20% |
The premium for non-contract customers is in addition to the rate charged to contract customers.
All employees in the company were paid GH¢45,000 per year and sundry operating costs, excluding salaries and fuel costs, were GH¢4,000,000 for the year.
The following operational data for the year relates to deliveries:
| Services A and B | Service C | |
|---|---|---|
| Average kilometres per vehicle/day | 400 | 600 |
| Number of vehicles | 50 | 18 |
| Operating days in the year | 300 | 300 |
For Year 2, the company has agreed a fixed price contract for fuel. As a result of this contract, fuel prices will be:
(a) GH¢0.40 per kilometre for Services A and B
(b) GH¢0.80 per kilometre for Service C.
Sales prices will be 3% higher in Year 2 than in Year 1, and salaries and operational expenses will be 5% higher. Sales volume will be exactly the same as in Year 1.
The number of employees will also be the same as in Year 1: 60 employees working full-time on Services A and B and 25 employees working full-time on Service C.
Required:
(a) Prepare a budgeted statement of profit or loss for the year to 31st December Year 2.
(b) Comment on vehicle utilisation.
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