Topic: Budgeting

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ICMA – Nov 2024 – L1 – Q2b – Working Capital

Calculates total amount held in working capital excluding cash and equivalents.

Question

Working Capital Calculation
A company has annual sales revenues of GH¢45 million and the following working capital periods:

Working Capital Item	Period (months)
Inventory conversion period	2.5
Accounts receivable collection period	2.0
Accounts payable payment period	1.5

Production costs are 70% of sales revenue.

Required:
Calculate the total amount held in working capital excluding cash and cash equivalents.

Answer

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Tags: Accounts Payable, Accounts Receivable, Budgeting, Costing, Inventory
Level: Level 1

Topic: Budgeting, Cost and Cost Behaviour
Series: Nov 2024

MI – Nov 2020 – L1 – SB – Q1 – Budgeting

Prepare the cash budget for the first three months of the year based on provided sales, expenses, and additional company details.

Question

WXYZ is preparing for the first half of the next year. The following information was available:

a. Sales – 15% of monthly sales are in cash, while the balance is sold on credit. Collections from receivables are 50% in the first month after sales, 30% in the second month, and the balance in the third month after sales.
b. Purchases are usually 55% of sales and paid in the month of purchase.
c. Insurance company is expected to pay the sum of N525,000 in February based on the company’s accidented vehicles.
d. Salary deductions are paid on a preceding-month basis.
e. Company income tax of N475,550 will be paid in March.
f. Cash and cash equivalent balance as at December is N502,760.
g. Bank charges are 1% of total payments for the month.
h. Additional Information:

Month	October (N)	November (N)	December (N)	January (N)	February (N)	March (N)
Sales	750,000	600,000	850,000	520,000	670,000	800,000
Net Salaries	230,000	200,000	250,000	210,000	240,000	270,000
Other Expenses	200,700	187,500	197,500	177,200	187,500	192,700
Salaries Deductions	29,400	28,400	39,400	28,700	32,750	27,650

Required:
Prepare the cash budget for the first three months of the year. (Total 20 Marks)

Answer

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Tags: Cash Budget, Forecasting, Payables, Purchases, Receivables, Sales
Level: Level 1

Topic: Budgeting
Series: NOV 2020

PSAF – May 2018 – L2 – Q5 – The Budgeting Process in the Public Sector

Explains the concept of a national budget, surplus and deficit budget implications, and challenges in the implementation of national budgets in Nigeria.

Question

In government’s quest to optimally develop and efficiently manage available resources, national budgets are usually prepared to put economic development firmly on course.

Required:

a. Describe briefly a national budget. (3 Marks)

b. Explain briefly the implication of each of the following for the performance of the economy: i. A surplus budget ii. A deficit budget (4 Marks)

c. Explain FOUR problems to be encountered in the effective implementation of national budgets in Nigeria. (8 Marks)

Answer

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Tags: Budget Implementation, Deficit Budget, National Budget, Surplus Budget
Level: Level 2

Topic: Budgeting
Series: MAY 2018

PSAF – May 2018 – L2 – Q2 – The Budgeting Process in the Public Sector

Prepare a proposed budget for Imafidon Local Government Authority Happiness and Social Centres for the year ended December 31, 2019.

Question

The Local Development Authorities (LDAs) of Imafidion Council agreed to transfer
their Social Centres for the purpose of adequate maintenance to the state
government‟s Ministry of Happiness. The state government accepted to take over
the centres and therefore requested for their 2019 budget. The following were
supplied by the Social Centres to the government through the Director of Accounts,
Ministry of Happiness.
Actual salaries, wages and overhead expenses (2018)

Other details provided include:

ii. The wages were for 5 employees (known as Happiness Assistants) paid on
hourly basis with maximum of 20 hours per week at N1,260 per hour, plus over
time bonus as follows:

The guideline for the budget has been given as follows:
i. Rent to remain as for last year since the lease would still be running for two
years, but security service providers would charge only N0.6m next year;
ii. No festival would be planned for the following year and as a result there
would be no promotion expenses and grant in the following year;
iii. Though same number of visitors would come to the centre, the rate of
admission fees would go up by 10 percent for the following year;
iv. There would be an increase of 5% on other incomes. The budget for Artifact
for sale would increase by the same proportion as the Sales in the Centre
budget which would increase by 20%;
v. Power/electricity and rates would increase by 8% and 2% respectively while
other supplies would increase by 2.5%;
vi. There would be 2.60% increase in wages, while the National Insurance
contributions would increase to 12% of salaries instead of the current 10%
and pension contribution would be 15% of salaries;
vii. Director of Finance, Ministry of Happiness would not be due for salary
increment but the Social Officer would earn increment of N0.088m;
viii. There would be no overtime payment; and
ix. Service level agreement was fixed at N2.948m.
You are required to prepare a proposed budget for Imafidon Local Government
Authority Happiness and Social Centres for the year ended December 31, 2019 (use
same format as in the Question). (Total 2O Marks)

Answer

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Tags: Budget Preparation, Expenditure, Local Government Finance
Level: Level 2

Topic: Budgeting

MI – Nov 2015 – L1 – SB – Q2 – Budgeting

Compiles functional budgets for sales, production, and material purchases for six months.

Question

ABC Limited is engaged in the production of AiBiCi product and the following data were extracted from the Budget Committee’s Report:

i. Sales is expected to be 20,000 units each in months 1 and 2, this will increase by 10% each in months 3 and 4, and 5% each in months 5 and 6.

ii. Unit selling price is currently estimated at N250, and due to increased awareness, the price will move up to N300 in the fourth month.

iii. To produce one unit of AiBiCi, the following materials are required:

2kgs of A @ N20/kg
5kgs of B @ N5/kg
2kgs of C @ N10/kg

iv. The company keeps 10% of estimated sales as closing inventory for the month. Assume no opening inventory for month 1.

You are required to compile, in tabular form, the following functional budgets for the next 6 months:

a. Sales in quantity and value. (6 Marks)

b. Production in quantity. (6 Marks)

c. Material purchase in quantity and the total cost. (8 Marks)

(Total 20 Marks)

Answer

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Tags: Budget Committee, Budgeting, Cost Management, Financial planning, Functional Budgets, Material Purchase, Production Budget, Sales Budget
Level: Level 1

Topic: Budgeting
Series: NOV 2015

MI – Nov 2015 – L1 – SA – Q12 – Budgeting

Identifies which option is not considered a functional budget.

Question

he following are functional budgets EXCEPT:
A. Distribution cost budget
B. Production budget
C. Sales budget
D. Material purchase budget
E. Cash budget

Answer

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Tags: Budgeting, Cost Management, Functional Budgets
Level: Level 1

Topic: Budgeting
Series: NOV 2015

MI – Nov 2015 – L1 – SA – Q1 – Budgeting

Identifies the term for intentionally underestimating revenues or overestimating costs in budgeting.

Question

A situation where budgeted revenues are intentionally under-estimated or budgeted costs are intentionally over-estimated is known as:
A. Participatory budget
B. Surplus budget
C. Budget slack
D. Deficit budget
E. Imposed budget

Answer

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Tags: Budget Slack, Budgeting, Cost Estimation
Level: Level 1

Topic: Budgeting
Series: NOV 2015

MI – May 2018 – L1 – SB – Q2 – Budgeting

Preparation of a cash budget for Orok Trading Company.

Question

Orok Trading Company sells cement bags at N2,000 each. According to projections, it would sell 100 bags each in October, November, and December; and 120 bags per month in the succeeding months.

The company sells on credit, with customers paying 50% in the month following sale, and the balance 30 days later.

Other expected inflows are:

Sale of plant, N80,000 in January and N50,000 in February
Insurance claim, N50,000 in February
Damages from a lawsuit, N60,000 in March

The company purchases its products from a supplier who gives two months’ credit. The company’s cost of sale is 60%.

Projected outflows are:

Salaries of N30,000, paid monthly
Rent of N25,000, paid monthly
Other administrative expenses of N55,000 per month are settled as they arise.
Income tax of N25,000 payable in January
New asset, N40,000 to be purchased in January

The bank balance on December 31 is N235,000 negative.

You are required to:

Prepare a monthly Cash Budget for January to March. Show all workings.

Answer

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Tags: Cash Budget, Projections
Level: Level 1

Topic: Budgeting
Series: MAY 2018

MI – May 2018 – L1 – SA – Q12 – Budgeting

Understanding the purpose of cash budgeting.

Question

Which of the following is NOT a purpose of cash budgeting?
A. To ensure availability of working capital throughout the period concerned
B. To determine the timing of cash inflows and outflows in advance
C. To plan on investing surplus cash whenever it arises
D. To plan against likely cash deficits during the budget period
E. To reduce cost of operation

Answer

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Tags: Cash Budgeting, Working Capital
Level: Level 1

Topic: Budgeting
Series: MAY 2018

MI – May 2018 – L1 – SA – Q10 – Budgeting

Distinguishing between a budget and a forecast.

Question

What is the difference between a budget and a forecast?
A. They mean the same and they are used interchangeably
B. A budget is for internal use while a forecast is for external use
C. A budget is qualitative while a forecast is quantitative
D. A budget is a plan whereas a forecast is the actual
E. A budget is a plan of where a business wants to go while a forecast is the indication of where it is actually going

Answer

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Tags: Budgeting, Forecasting

Topic: Budgeting
Series: MAY 2018

ICMA – Nov 2024 – L1 – Q2b – Working Capital

Calculates total amount held in working capital excluding cash and equivalents.

Question

Working Capital Calculation
A company has annual sales revenues of GH¢45 million and the following working capital periods:

Working Capital Item	Period (months)
Inventory conversion period	2.5
Accounts receivable collection period	2.0
Accounts payable payment period	1.5

Production costs are 70% of sales revenue.

Required:
Calculate the total amount held in working capital excluding cash and cash equivalents.

Answer

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Tags: Accounts Payable, Accounts Receivable, Budgeting, Costing, Inventory
Level: Level 1

Topic: Budgeting, Cost and Cost Behaviour
Series: Nov 2024

MI – Nov 2020 – L1 – SB – Q1 – Budgeting

Prepare the cash budget for the first three months of the year based on provided sales, expenses, and additional company details.

Question

WXYZ is preparing for the first half of the next year. The following information was available:

Month	October (N)	November (N)	December (N)	January (N)	February (N)	March (N)
Sales	750,000	600,000	850,000	520,000	670,000	800,000
Net Salaries	230,000	200,000	250,000	210,000	240,000	270,000
Other Expenses	200,700	187,500	197,500	177,200	187,500	192,700
Salaries Deductions	29,400	28,400	39,400	28,700	32,750	27,650

Required:
Prepare the cash budget for the first three months of the year. (Total 20 Marks)

Answer

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Tags: Cash Budget, Forecasting, Payables, Purchases, Receivables, Sales
Level: Level 1

Topic: Budgeting
Series: NOV 2020

PSAF – May 2018 – L2 – Q5 – The Budgeting Process in the Public Sector

Explains the concept of a national budget, surplus and deficit budget implications, and challenges in the implementation of national budgets in Nigeria.

Question

In government’s quest to optimally develop and efficiently manage available resources, national budgets are usually prepared to put economic development firmly on course.

Required:

a. Describe briefly a national budget. (3 Marks)

b. Explain briefly the implication of each of the following for the performance of the economy: i. A surplus budget ii. A deficit budget (4 Marks)

c. Explain FOUR problems to be encountered in the effective implementation of national budgets in Nigeria. (8 Marks)

Answer

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Tags: Budget Implementation, Deficit Budget, National Budget, Surplus Budget
Level: Level 2

Topic: Budgeting
Series: MAY 2018

PSAF – May 2018 – L2 – Q2 – The Budgeting Process in the Public Sector

Prepare a proposed budget for Imafidon Local Government Authority Happiness and Social Centres for the year ended December 31, 2019.

Question

Other details provided include:

ii. The wages were for 5 employees (known as Happiness Assistants) paid on
hourly basis with maximum of 20 hours per week at N1,260 per hour, plus over
time bonus as follows:

Answer

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Tags: Budget Preparation, Expenditure, Local Government Finance
Level: Level 2

Topic: Budgeting

MI – Nov 2015 – L1 – SB – Q2 – Budgeting

Compiles functional budgets for sales, production, and material purchases for six months.

Question

ABC Limited is engaged in the production of AiBiCi product and the following data were extracted from the Budget Committee’s Report:

i. Sales is expected to be 20,000 units each in months 1 and 2, this will increase by 10% each in months 3 and 4, and 5% each in months 5 and 6.

ii. Unit selling price is currently estimated at N250, and due to increased awareness, the price will move up to N300 in the fourth month.

iii. To produce one unit of AiBiCi, the following materials are required:

2kgs of A @ N20/kg
5kgs of B @ N5/kg
2kgs of C @ N10/kg

iv. The company keeps 10% of estimated sales as closing inventory for the month. Assume no opening inventory for month 1.

You are required to compile, in tabular form, the following functional budgets for the next 6 months:

a. Sales in quantity and value. (6 Marks)

b. Production in quantity. (6 Marks)

c. Material purchase in quantity and the total cost. (8 Marks)

(Total 20 Marks)

Answer

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Tags: Budget Committee, Budgeting, Cost Management, Financial planning, Functional Budgets, Material Purchase, Production Budget, Sales Budget
Level: Level 1

Topic: Budgeting
Series: NOV 2015

MI – Nov 2015 – L1 – SA – Q12 – Budgeting

Identifies which option is not considered a functional budget.

Question

he following are functional budgets EXCEPT:
A. Distribution cost budget
B. Production budget
C. Sales budget
D. Material purchase budget
E. Cash budget

Answer

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Tags: Budgeting, Cost Management, Functional Budgets
Level: Level 1

Topic: Budgeting
Series: NOV 2015

MI – Nov 2015 – L1 – SA – Q1 – Budgeting

Identifies the term for intentionally underestimating revenues or overestimating costs in budgeting.

Question

Answer

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Tags: Budget Slack, Budgeting, Cost Estimation
Level: Level 1

Topic: Budgeting
Series: NOV 2015

MI – May 2018 – L1 – SB – Q2 – Budgeting

Preparation of a cash budget for Orok Trading Company.

Question

Orok Trading Company sells cement bags at N2,000 each. According to projections, it would sell 100 bags each in October, November, and December; and 120 bags per month in the succeeding months.

The company sells on credit, with customers paying 50% in the month following sale, and the balance 30 days later.

Other expected inflows are:

Sale of plant, N80,000 in January and N50,000 in February
Insurance claim, N50,000 in February
Damages from a lawsuit, N60,000 in March

The company purchases its products from a supplier who gives two months’ credit. The company’s cost of sale is 60%.

Projected outflows are:

Salaries of N30,000, paid monthly
Rent of N25,000, paid monthly
Other administrative expenses of N55,000 per month are settled as they arise.
Income tax of N25,000 payable in January
New asset, N40,000 to be purchased in January

The bank balance on December 31 is N235,000 negative.

You are required to:

Prepare a monthly Cash Budget for January to March. Show all workings.

Answer

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Tags: Cash Budget, Projections
Level: Level 1

Topic: Budgeting
Series: MAY 2018

MI – May 2018 – L1 – SA – Q12 – Budgeting

Understanding the purpose of cash budgeting.

Question

Answer

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Tags: Cash Budgeting, Working Capital
Level: Level 1

Topic: Budgeting
Series: MAY 2018

MI – May 2018 – L1 – SA – Q10 – Budgeting

Distinguishing between a budget and a forecast.

Question

Answer

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Tags: Budgeting, Forecasting

Topic: Budgeting
Series: MAY 2018

Topic: Budgeting

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ICMA – Nov 2024 – L1 – Q2b – Working Capital

Calculates total amount held in working capital excluding cash and equivalents.

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MI – Nov 2020 – L1 – SB – Q1 – Budgeting

Prepare the cash budget for the first three months of the year based on provided sales, expenses, and additional company details.

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PSAF – May 2018 – L2 – Q5 – The Budgeting Process in the Public Sector

Explains the concept of a national budget, surplus and deficit budget implications, and challenges in the implementation of national budgets in Nigeria.

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PSAF – May 2018 – L2 – Q2 – The Budgeting Process in the Public Sector

Prepare a proposed budget for Imafidon Local Government Authority Happiness and Social Centres for the year ended December 31, 2019.

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MI – Nov 2015 – L1 – SB – Q2 – Budgeting

Compiles functional budgets for sales, production, and material purchases for six months.

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MI – Nov 2015 – L1 – SA – Q12 – Budgeting

Identifies which option is not considered a functional budget.

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MI – Nov 2015 – L1 – SA – Q1 – Budgeting

Identifies the term for intentionally underestimating revenues or overestimating costs in budgeting.

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MI – May 2018 – L1 – SB – Q2 – Budgeting

Preparation of a cash budget for Orok Trading Company.

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MI – May 2018 – L1 – SA – Q12 – Budgeting

Understanding the purpose of cash budgeting.

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MI – May 2018 – L1 – SA – Q10 – Budgeting

Distinguishing between a budget and a forecast.

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ICMA – Nov 2024 – L1 – Q2b – Working Capital

Calculates total amount held in working capital excluding cash and equivalents.

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MI – Nov 2020 – L1 – SB – Q1 – Budgeting

Prepare the cash budget for the first three months of the year based on provided sales, expenses, and additional company details.

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PSAF – May 2018 – L2 – Q5 – The Budgeting Process in the Public Sector

Explains the concept of a national budget, surplus and deficit budget implications, and challenges in the implementation of national budgets in Nigeria.

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PSAF – May 2018 – L2 – Q2 – The Budgeting Process in the Public Sector

Prepare a proposed budget for Imafidon Local Government Authority Happiness and Social Centres for the year ended December 31, 2019.

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MI – Nov 2015 – L1 – SB – Q2 – Budgeting

Compiles functional budgets for sales, production, and material purchases for six months.

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MI – Nov 2015 – L1 – SA – Q12 – Budgeting

Identifies which option is not considered a functional budget.

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MI – Nov 2015 – L1 – SA – Q1 – Budgeting

Identifies the term for intentionally underestimating revenues or overestimating costs in budgeting.

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MI – May 2018 – L1 – SB – Q2 – Budgeting

Preparation of a cash budget for Orok Trading Company.

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MI – May 2018 – L1 – SA – Q12 – Budgeting

Understanding the purpose of cash budgeting.

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MI – May 2018 – L1 – SA – Q10 – Budgeting

Distinguishing between a budget and a forecast.

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