Osborne budgeting question, revised salary budget
Clarekaye
Registered Posts: 307
I am working through osborne books and I keep getting stuck on these questions how do you work it out ?!
The draft admin budget is £187,200. This assumes a 4% pay rise from the beginning of the year. You have now been informed the pay rise will be 2.5%
Calculate the revised salary budget
Thanks!
The draft admin budget is £187,200. This assumes a 4% pay rise from the beginning of the year. You have now been informed the pay rise will be 2.5%
Calculate the revised salary budget
Thanks!
0
Comments

You need to get back to the original figure first, 187200 is 104% of that, so the original figure is 187200/104 x 100 (sorry don't have a calculator to hand). This the gives you the base on which to calculate the actual 2.5% increase, so take your answer from above and multiply by 1.025.0

Ah ok, how come its not 1872004% I think thats what I dont understand
Can I ask another similar one,
Budget for materials is 319770, this assumed a 2% price increase from the previous year togther with a reduction in production volume of 5%
However production remains static and the price increase is 3%
Going from the original question how come 319770/107 x 100 doesnt work0 
Hi Clarekaye,
The reason is that is your first post you say "it assume a 4% pay rise from the beginning of the year". Therefore its the original figure + 4%. You cannot then take 4% off the new figure as mathematically this would give a different answer.
As nps said ..its 187200/104 x 100  which is 180000. if you took it your way  4% off 187200 would be 1872007499 = 179701 which would be wrong.
for your materials query....again you have to work backwards on this one..319770..
to take out the 2% price increase  319770 /102*100 = 313500
then increase production volume back to exclude the 5% reduction...313500 / 95*100 = 330000
and lastly put in the 3% price increase...330000 * 1.03 = 339900
Hope this helps!!0 
With these type of questions it is always best to try to avoid using percentages, especially if you're using a calculator.
If you think about VAT calcualtions @ 20% and you are asked to calculate the net of, say, £1488.00
If you were to do £1488.00  20% on a calculator you would end up with the figure of £1190.40 which is wrong.
The correct way to calculate the net figure less VAT would be £1488.00 / 1.2 = £1240.00. This is because net x 1.2 = gross, therefore gross / 1.2 = net.
The draft admin budget of £187200 is 104% of the original figure as stated by NPS. This would be written as N + 4% = £187200 and is the same as N x 1.04 = £187200. You can now transpose the calculation in order to find out what the original budget figure was and this would therefore be written as £187200 / 1.04 = £180000. If you then add the revised pay rise of 2.5% you finish up with £184500.00.
I have looked through by Osborne book and haven't been able to locate the questions that you refer to but the second part works in much the same way.
If £319770 is equal to 100% plus an additional 2% then instead of deducting 2% you need to divide by 1.02 so £319770 / 1.02 = £313500
This figure is a reduction of 5% on the previous year and is therefore 95% therefore the original budget would be £330000 which is £313500 /.95 or £313500 / 95 x 100
A 3% increase on £330000 would be £339900 (£330000 x 1.03) with no change in production.
Hope this helps.
0 
I am on page 84 in the workbook, section 2, 2.1
Thanks for all your help I will write it all so I can understand it Thanks!0
Categories
 All Categories
 1.2K Books to buy and sell
 2.3K General discussion
 12.5K For AAT students
 319 NEW! Qualifications 2022
 157 General Qualifications 2022 discussion
 11 AAT Level 2 Certificate in Accounting
 56 AAT Level 3 Diploma in Accounting
 92 AAT Level 4 Diploma in Professional Accounting
 8.8K For accounting professionals
 23 coronavirus (Covid19)
 272 VAT
 92 Software
 274 Tax
 136 Bookkeeping
 7.2K General accounting discussion
 201 AAT member discussion
 3.8K For everyone
 38 AAT news and announcements
 345 Feedback for AAT
 2.8K Chat and offtopic discussion
 582 Job postings
 16 Who can benefit from AAT?
 36 Where can AAT take me?
 42 Getting started with AAT
 26 Finding an AAT training provider
 48 Distance learning and other ways to study AAT
 25 Apprenticeships
 66 AAT membership