BUDGETING PRACTICE ASSESSMENT 2&4 AQ2010

My first question is on Practice Ass 2, 2.1 (AQ2010). The question is:

This years budget for raw material was set at £216,300. This assumed a 3% increase in production volume and a 5% increase in raw material prices compared with the previous year.

However production volume is 10% higher than the previous year and there has been no price increase.

Calculate the material cost forecast?

My second question is on Practice Ass 4, 2.1 (AQ2010).

This years budget for raw material was set at £302400. This assumed a 4% reduction in production volume and a 5% increase in raw material prices compared with the previous year.

However the production volume is 6% lower than the previous year and therefore there has been no price increase.

Calculate the material cost forecast?

Any help please.

Comments

  • lenalenalenalena Registered Posts: 1
    question 1 regarding material cost forecast

    y= last year's material cost

    (y * 1.03) * 1.05= £216,300
    (last year's forecast multiply 3% increase in volume multiply 5% increase in price)

    we need to remove the 5% increase in price now:

    (y* 1.03)= £216,300/1.05
    (y*1.03)= £206,000

    now we need to remove the 3% increase in volume:

    y= £206,000/1.03
    y=£200,000

    last year's material cost was £200,000

    we need to add 10% increase in volume which will give us the material cost forecast for this year

    200,000 multiply 1.1= £220,000
  • leptionleption Registered Posts: 36
    Thank you for explaining that, sorry to take so long to come back to you.
  • j1994j1994 Registered Posts: 106
    Does anyone mind helping me with 1.4c and 2.1a assesment 2 2010
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