Budgeting CBA Practice Paper No.2 - Mistakes??

HELLOU03 Registered Posts: 13 Regular contributor ⭐ 😼 ⭐

Does anyone know whether the model answers are slightly incorrect on this paper?

Looking at Task 1.3 and I am slightly confused by their answers here?! My answers are slightly different for example:

Use in Production in £31,200 x £2.50 = £78,000 but they have £77,800 and so on?

Someone tell me I am right or that I have the wrong answer as its now driving me crazy?! lol

Thank you peeps :)



  • amyjayne27
    amyjayne27 Registered Posts: 314

    It isn't incorrect; for the used in production figure you take the opening inventory plus purchases less the closing inventory which you have just worked out.

    You still work out closing inventory using budgeted purchase price ie 2.50 x 1200 = 3000. Therefore 3300 +77500 less the 3000 equals 77800.

    Hope this makes sense!
  • HELLOU03
    HELLOU03 Registered Posts: 13 Regular contributor ⭐ 😼 ⭐
    Hi Amy,

    Thank you soooo much for your reply - much appreciated, all clear now!!! Its going to be a long weekend I reckon!!!

    Thanks again, Helen x
  • SandyHood
    SandyHood Registered, Moderator Posts: 2,034
    A super explanation Amy.

    In task 1.3 it is vital to spot whether your question is FIFO or AVCO
    In the exam you have tried FIFO is being used: you can spot it from these statements
    1. closing inventory (of raw materials) will be valued at the budgeted purchase price
    2. Closing finished goods inventory will be valued at the budgeted production cost

    When you know that closing stock values are only based on purchases/production during the period that tells you to use FIFO

    AVCO would be used where the total of opening stock AND purchases (or production) costs in the period are used to value the closing stock.

    Your answer seems to be treating the question as AVCO (although I thought £2.49 was closer)
    subtotal material cost £80,800 = £2.493827 or approximately £2.49
    . sub-total kgs . ..... 2,400 kgs

    Under the AVCO approach you do not have to value closing stock first (but I recommend that you do for the reason Amy gave. If you do it whichever method of valuation you are using, it is one less thing to have to think about in the exam
    So closing stock 1200 kgs x £2.49 = £2,988 (or £2,993 if you use the un-rounded cost per kg)
    Leaving a value for used in production of £77,812 (or £77,8070)
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  • amyjayne27
    amyjayne27 Registered Posts: 314
    No problem Helen. If you have any other questions just add them to this thread as I am taking Budgeting on Monday so hopefully can help. I am mainly struggling on the written questions, especially the second one.

    Any tips on the written questions Sandy?

    Many thanks
  • HELLOU03
    HELLOU03 Registered Posts: 13 Regular contributor ⭐ 😼 ⭐
    Thanks for the thorough explanation Sandy, thats really helped also.

    Amy, good luck for Monday, I am taking mine on the 28th so got a couple of weeks but still nervous. Not feeling a 100% on it at all. I have passed all the others, this is a re-sit from last year I just havent had chance to take. It will be my first computer based exam as I sat the others as paper based exams. I am not in college no more so its not as easy to just ask your tutor when your sitting at home going through questions so I had no option but to ask on here.

    You will have to let me know how you get on next week, you never know I might have some more questions lol.

    Thanks again.
    Helen :)
  • vikikell
    vikikell Registered Posts: 6 Regular contributor ⭐ 😼 ⭐
    how did you find the 1200???
  • HELLOU03
    HELLOU03 Registered Posts: 13 Regular contributor ⭐ 😼 ⭐

    The 1200 is the closing inventory.

    Hope this helps.
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