Help with budgeting practice question
bjw
Registered Posts: 3 New contributor 🐸
On the Budgeting practice paper question 2.1c the question states:
This year's budget for raw materials was set at £302,400. This assumed a 4% reduction in production and a 5% increase in raw material prices compared with the previous year.
However production volume is 6% lower than the previous year and there has been no price increase.
Calculate the material cost forecast: ????
The answer is meant to be £282,000
Please can someone explain how to work this out??
Thanks
This year's budget for raw materials was set at £302,400. This assumed a 4% reduction in production and a 5% increase in raw material prices compared with the previous year.
However production volume is 6% lower than the previous year and there has been no price increase.
Calculate the material cost forecast: ????
The answer is meant to be £282,000
Please can someone explain how to work this out??
Thanks
0
Comments

Price was £302,400 including the 5% price increase, so without that increase it would be £288,000 (302,400 divided by 105 then multiplied by 100).
£288,000 divided by 96 (less 4% decrease) and multiplied by 94 (add 6% decrease) = £282,000
Does that explain it ok?
T.C. (AAT Tutor)0
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