Ozgur Celik

Question 1

Problems with setting up Sales Budget:The sales budget can lead to inflexibility in decision making and needs to be changed as a circumstance change. Creating a sales budget is a time consuming process therefore it could have un-realistic information that will add to de-motivation. The sales budget could be inaccurate or unreasonable assumptions which can quickly turn into a unrealistic budget. It would also be difficult to develop an accurate sales budget, so it would have to be estimated on a quarterly basis. When this happens, all other budgets would have to be revised from the sales figures would could also take up too much time.

Problems with setting up a Production Budget:Production budget is not translating its production requirements into pounds sterling. It is just dealing with unit volumes and cannot estimate the quantities’ of every product. In order to change this into pounds sterling, the production budget would have to be moved into different parts such as direct labour budget and direct materials budget.

Question 2

i. 4000ii. A) 3000= 27000 B) 8000=54000iii. A) 2000=18000 B) 9000 = 81000iv. A) 1000 = LOSS B)10000 = PROFIT C) 4000 = BREAK-EVEN POINT

Advantages:

It can help the company to determine which products to develop and which to table. Performing a break-even analysis can help to calculate as accurately as possible and control them by detecting unusual and unnoticed costs. Another advantage would be the analysis provides a structured behaviour of profits in relation to the output. It helps the planning of the company.

Disadvantages:

This is only done to analyse one product at a time which could take a long period of time to analyse every product. It is difficult to classify all variables or all fixed costs and if the income functions change during the analysis. In the break-even chart, the selling prices would have frequent changes that would effect the analysis to be unreliable and the relationship of the ouput and costs will become obsolete very quickly.

Question 3

Ozgur Celik

Nothing changed because the total cost per item is still the same and all other cost reduced at the same time by 5%. This would happen because if the output catches up with the fixed cost while the fixed cost is decreasing, it will allow the fixed cost to spread.

Question 5

September In September the company received 101,280 but the total payments were 204,000, because of the 10,000 balance before the company was in 92,720 in debt.

October The sales went up to 124,720 and the payments went down to 148,000 but because of the debts from last month, their debts went up to 116,000.

November In November, the sales have increased to 183,360 and the expenses have dropped down to 142,000. The sales were more than the payments. This has helped the company to pay off their debts from the last two months but there still were 74,640 in debt.

December In December, the total receipts were very good. They made 214,240 and had only 130,000 of payments. The company could pay off the debts from the last months and also made a profit of 9,600.

3. Recommend alternative course of actions

The company could use to improve its cash flow position. The company need to control their expenses.