# Budgeting HELP

bjw
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**3**Registered
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

## Comments

233RegisteredNext we have to deduct the 5% that was accounted for, for an increase in raw materials price so 31500/105x100 = 30000 This leaves us with the figure before adjustments that we need, and we can now make the correct adjustment.

30000/100x94 = 282000 the figure of 94 is 100% less the 6% that needs to be adjusted.

I hope this helps. These questions are really fun when you get the hang of them.

Neil.

3RegisteredThanks you :001_smile:

233RegisteredGood luck,

Neil.

283RegisteredFirst of all you need to do the first part of the question in adding or deducting back,however you only need to bother about the second part of this if there is a reference to it in the last part of the question.

In other words if in the last part they make no mention of the second possible calculation you then ignore it.

I hope this helps.