# Budgeting next week!!!

Options
Registered Posts: 50 Epic contributor 🐘
I’m revising for Budgeting, going through practice assessment 1, and I have come across a few questions that I am unsure of where the AAT got their answers from.

I have tried to write the question out for most of them for convenience. :001_smile:

Any help would be appreciated. :001_smile:

Question 1.2 part b

How many items of product L must be manufactured each month to allow for waste?
Waste is 10%

Required units
Month 1 72000
Month 2 80000
Month 3 81000

To work this out I did…
72000/100 x 10 = 7200
So, I said that the answer for month 1 was 79200. However, the actual answer was 80000. This works out at around 11.11%.

It is the same for the others as well. Does anyone know why, or how to work this out?

Question 1.2 part c

15000 units to be manufactured
Each unit uses 1.5 m of material
There is 10% wastage
The opening stock is 12000 m
The closing stock is 10000 m

How much material must be purchased?

To work this out I did…
15000 x 1.5 = 22500

22500 + 10% = 24750

24750 - 12000 + 10000 =22750

So, my answer was 22750 m. However, the answer was 23000 m, this works the wastage out at around 11.11% again. Is it me or the AAT getting the wrong answers? :001_unsure:

Question 1.3

How do you calculate the materials use in production, in £’s?

I’m not sure, which figures the AAT used to reach the answer of £27200.

Question 2.1 part c

Next year energy costs are forecast at £228800. This assumes a 4% increase in energy consumption and a 5% increase in gas and electricity tariffs.

However, energy saving measures are being proposed, instead of increasing, consumption should reduce by 10%.

The energy forecast should be revised to….?

The AAT has £198000 as its answer, does anyone know how they got to this?

Question 2.2

This question is an operating report, I could work everything out except for the equipment hire.

It says that equipment hire is a stepped cost, budgeted to increase at every 8000 units of monthly production.

Operating budget for July
63000 units the equipment hire is £32000.

The operating report is 68000 units.

The actual for equipment hire is 35000.

So how is the budget flexed to reach the AAT’s answer of £36000?

• Registered Posts: 1,189 Beyond epic contributor 🧙‍♂️
Options
I’m revising for Budgeting, going through practice assessment 1, and I have come across a few questions that I am unsure of where the AAT got their answers from.

I have tried to write the question out for most of them for convenience. :001_smile:

Any help would be appreciated. :001_smile:

Question 2.2

This question is an operating report, I could work everything out except for the equipment hire.

It says that equipment hire is a stepped cost, budgeted to increase at every 8000 units of monthly production.

Operating budget for July
63000 units the equipment hire is £32000.

The operating report is 68000 units.

The actual for equipment hire is 35000.

So how is the budget flexed to reach the AAT’s answer of £36000?

Hi on this one

Operating budget 63000 units / 8000 units (being the stepped cost) = will need 8 machines to do the job

to flex take 68000/8000 = 9 machines

price to hire = £32000 /8 = £4000 per machine

so for flexed budget: takes 9 machines at £4000 per machine = £36000

Hope this helps

Jan
• Registered Posts: 50 Epic contributor 🐘
Options
NicolaR wrote: »
This would be the same proforma for 1.2 part b. You need to assume the amounts you are given are 90% and gross up to 100%.

Thank you Nicola for all of your help i remember that now. :laugh:
• Registered Posts: 50 Epic contributor 🐘
Options
Thank you Jan for that that makes sense.
• Registered Posts: 1,189 Beyond epic contributor 🧙‍♂️
Options

Thanks Nicola for the rest as I couldn't remember will keep these safe as I got my resit to do for Budgeting
• Registered Posts: 50 Epic contributor 🐘
Options
Can anyonw help me with the above 2.1 c question as still unsure what to do with it?
• Registered Posts: 120 Beyond epic contributor 🧙‍♂️
Options

"Energy costs are forecast at £228,800. This assumes a 4% increase in energy consumption..."

Ignore the information you are given about the increase in gas and electricity tariffs, as the next part of the question ("energy saving measures are being proposed, instead of increasing, consumption should reduce by 10%") only asks you to focus on energy, not gas and electricity.

So, the figure £228,800 is actually a figure of 104%, because of the 4% increase in energy consumption. You just need to convert this to what 100% would be, so 228,800 divided by 104 multiplied by 100 equals £220,000.

Now, you are told that the consumption will further reduce by 10%. So, take the figure of £220,000, divide it by 100 and multiply by 10, which equals £22,000.

You then take the £22,000 away from the £220,000, which makes £198,000.

Does that make sense?
• Registered Posts: 63 Epic contributor 🐘
Options
Hi Morpheus
Is that the reason we should ignore the increase in gas and electricity?. I thought energy=gas and electricity?.

I haven't started studying for Budgeting but if I was to have an uninformed pop at it....it seems the answer has been arrived at by manipulating the forecast energy cost based solely on the consumption stats as I'm guessing the tariffs will go up regardless and we shouldn't "remove" the increase in the tariffs from the forecast figure.

£228,800/1.04= £220,000 (to get rid of the assumed 4% increase in energy consumption)

£220,000*0.90= £198,000 (to incorporate the 10% decrease in consumption anticipated as a result of the energy saving measures being proposed).
• Registered Posts: 120 Beyond epic contributor 🧙‍♂️
Options
Ah, maybe you have to ignore the gas and electricity because it's a tarriff, and the energy cost is consumption? I always saw gas and electricity as energy too, but that's the way I approached questions like this and it always seemed to work! Apologies for the confusion.