Production Budget Worksheet,

Jan 2010 Question 2.

1. West Anglian Farms has purchased a farm. The farm consists of four fields of different sizes.

The field sizes are:

Field A B C D

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Size (hectares) 120 100 85 65

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The owners have decided to grow four different crops, one crop in each field for the next year.

The information is as follows:

dh
Crop Wheat Barley Sugar Maize
Output per hectare (tonnes) 8 5 10 3
Variable costs per tonne £50 £70 £450 £100

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Market price per tonne £150 £160 £800 £200
ho
Required:

(a) (i) Calculate the contribution per hectare for each of the four crops.
C
(12)

(ii) Arrange the contribution per hectare from each of the four crops in order, starting with the
largest.
(2)
H

(iii) Decide the field in which each of the four crops will be grown to obtain maximum
contribution.
(2)
d

(iv) Calculate the maximum profit for the year for West Anglian Farms if fixed costs for the
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year are £328 000.

(14)
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M36363A_Source_Booklet_GCE_Accou4 4 03/09/2009 14:30:43

 The owners estimate that income from all sales will be as follows:

July August September

35% 50% 15%

(b) Prepare a sales budget for the months July, August and September.
(10)

(c) Evaluate the usefulness to West Anglian Farms of preparing a cash budget for the year.

y
(12)

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(Total 52 marks)

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M36363A_Source_Booklet_GCE_Accou5 5 03/09/2009 14:30:43

 June 2011 question 6

2. HotSpot plc produces ovens, which are then sold and delivered around the country. The Sales teams
are split into 4 regions: North, South, East and West. HotSpot plc is preparing budgets for the next
trading period July to December 2011.

The following information is available for the period July to December 2011.

(i) Sales in the North are forecast to be constant at 600 ovens per month.

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(ii) Sales in the South are steadily rising. Sales are expected to be 200 ovens in July. Sales are then
forecast to rise 10% each month compared to the previous month.

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(iii) Sales in the East are steadily declining. Sales are expected to be 500 in July. Every month,
sales are then forecast to fall 5% each month compared to the previous month.

dh
(iv) Sales in the West are variable, with a figure of 240 in July. Sales then fall at a constant rate to
a minimum of 195 in October. Sales then start to rise in November, at a constant rate, to reach
215 in December.

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Required:
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(a) Prepare the total sales budget, in ovens, for HotSpot plc for the six month period July to
December 2011. Within the total sales budget, show the forecast sales for the North, South,
East and West regions for each month. Round your answers to the nearest whole number.
(13)
C
Hotspot plc produces ovens to meet the expected future sales figures for each region.
There is usually a delay between producing and selling the ovens.

• Production for the North and the East is one month before sales.
H

• Production for the West is two months before sales.

• Production for the South is in the same month as sales.

At 30 June 2011 there are 100 unsold ovens in the inventory (stock). HotSpot plc will reduce this
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inventory (stock) by 50 ovens per month, starting in July.

Required:
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(b) Prepare the total ovens production budget for HotSpot plc for the four month period July to
October 2011. Within the total ovens production budget, show the forecast production for the
North, South, East and West regions for each month.
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(11)

(c) Evaluate the company’s policy of producing ovens for expected sales, rather than producing
ovens to match actual orders.
(8)

(Total 32 marks)

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 January 2012 question 4

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 May 2013 question 6

4 Venture Vending Limited is to start a business producing vending machines. The following
information is available:

 Sales are budgeted to be 5 vending machines a week, starting Week 3 in Month 1. In Month 2,
sales are budgeted to be 8 machines a week. In Month 3, sales are expected to rise to 12 machines
a week. Sales are expected to stay at this level in future months. Each vending machine sells for
£2 450.

y
 Production will start in Week 2 in Month 1. For Month 1, production will be 7 vending machines

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per week. In Month 2, production will be 10 machines a week. In Month 3, the number of
vending machines produced each week will be equal to sales in the following week. Any
vending machines produced but not sold each week will be put into inventory in the warehouse.

dh
 Materials for production will be delivered from Week 1 in Month 1. Each week, the materials
delivered are the materials needed for production in the following week. Each vending machine
requires £675 of materials.

w
 Materials are budgeted to be paid for 2 weeks after delivery. For example, materials delivered
in Week 1 in Month 1, will be paid for in Week 3 Month 1.
ho
 Customers are budgeted to pay 3 weeks after a sale. For example, a vending machine sold in
Week 3 Month 1, will be paid for in Week 2 Month 2.

 Assume 4 weeks in each month.

C
Required:

(a) Prepare, for the first three months of trading for Venture Vending Limited, the following budgets:
H

For each of the three months, the budgets should show total figures for EACH month, NOT
weekly figures.

(i) A sales budget in units of vending machines sold.

d

(3)

(ii) A production budget in units of vending machines produced.

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(3)

(iii) An inventory budget in units of vending machines. The budget is to show the number of
units going to inventory each month, and the total number of units in inventory at the end
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of each month.
(6)

(iv) A purchases budget in units.

(3)

(v) A purchases budget in pounds (£s).

(3)

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 (vi) A trade payables budget in pounds (£s) showing the trade payables figure at the end of
each month.
(3)

(vii) A trade receivables budget in pounds (£s) showing the trade receivables figure at the end
of each month.
(3)

At the end of Month 1, actual sales of vending machines have only been half (50%) of budgeted

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sales.

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Required:

(b) Evaluate whether Venture Vending Limited should draw up a new set of budgets to replace the
existing budgets for Months 2 and 3.

dh
(8)

(Total 32 marks)

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