From the following particulars, prepare a Forecasted Profit & Loss A/c (P & L A/c) for the year that ended on 31 December 2009, a Forecasted Balance Sheet as on that date, a Purchase Budget for the year 2009, a Sales Budget for the year 2009 and a Cash Budget for the year 2009:
i. Profit & Loss A/c for the year that ended on 31 December 2008
|
|
|
||
|
To Materials Consumed |
50,000 |
By Sales (1,000 units) |
2,00,000 |
|
To Wages (direct) |
30,000 |
|
|
|
To Factory Overheads [60% variable] |
20,000 |
|
|
|
To Administrative Overheads [fixed] |
20,000 |
|
|
|
To Selling & Distribution |
20,000 |
|
|
|
Overheads [60% fixed] |
|
|
|
|
To Net Profit before Tax ad |
60,000 |
|
|
|
|
2 00 000 |
|
2 00000 |
|
To Income Tax |
30,000 |
By Net Profit before Tax b/d |
60,000 |
|
To Net Profit after Tax c/d |
30,000 |
|
|
|
|
60,000 |
|
60,000 |
|
To Dividend |
10,000 |
By Net Profit after Tax b/d |
30,000 |
|
To Balance c/f |
20,000 |
|
|
|
|
30,000 |
|
30,000 |
i. Balance Sheet as on 31 December 2008
|
Liabilities |
Assets |
||
|
Share Capital: |
|
Fixed Assets |
1,00,000 |
|
6,000 Equity Shares of Rs. 10 each fully paid up |
60,000 |
[at cost less depreciation] |
|
|
Reserve & Surplus |
40,000 |
Stock of Raw Materials |
20,000 |
|
Sundry Creditors |
20,000 |
Sundry Debtors |
30,000 |
|
Provision for Tax |
30,000 |
Cash & Bank Balance |
10,000 |
|
Proposed Dividend |
10,000 |
|
|
|
|
1,60,000 |
|
1,60,000 |
Additional Information:
- The present level of activity is 50%. In the year 2009, it is expected to operate at 75% capacity. However, in order to sell the additional production in the market, the Selling Price per unit is to be reduced by 5% in the year 2009.
- Market price forecasts indicate that cost of material, labour and variable overheads are likely to increase by 4%, 5% and 5% respectively. Fixed Costs (other than depreciation) are also expected to go up by 5% due to annual increments of salaries.
- Fixed Costs include depreciation, which is a Fixed Instalment of Rs. 5,000 p.a., charged in full to production overhead.
- Three months’ requirements of raw materials are to be held in stock. The FIFO method is generally used in pricing out the issues.
- All units started for production are expected to be completed and sold in the Budget period.
- Sales and purchases are generally made on 2 months’ credit. Wages and expenses are paid within the period.
- Machinery Costing Rs. 25,000 is expected to be purchased for cash in December 2009.
- Rate of Income Tax is 50% and, if profit permits, a dividend of 20% may be proposed.