Management Accounts Budgeting Assignment

XGame Ltd

XGame Ltd is a small company which manufactures a popular children's game.  The company has decided to produce cash budgets and production budgets to ensure that its operations are better planned and more carefully controlled.

Budgeted production and sales for six months ending 30 June 2016are as follows:

                              Production                          Sales

                              Units                                  Units

Jan                          1200                                   1400

Feb                          1200                                   1300

Mar                         1300                                    1300

April                        1400                                    1500

May                        1500                                     1600

June                       1600                                     1800

Financial Information

• Variable factory overheads are expected to increase by 10% in May and remain at this level in June.
• Fixed factory overheads have been set at a 10% increase on last year.
• It has been decided to increase the selling price from £25 per gameto £27 fromApril onwards. Sales are made on one month's credit. Purchases of the raw materials are two months credit.
• The company has decided to purchase a new more efficient machine. The machine will cost£50,000 and is expected to be paid for in March.

Task1-

The Cash Flow Budget has been prepared but has not yet been adjusted for the New Machinery.  Refer to Excel Spreadsheet 1.

You are required to make the adjustment for the New Machinery and prepare brief notes for your manager.  The notes should answer the following questions:

a. Explain how the purchase of the New Machinery affects the Cash Flow, and clearly state the problem.

b. Analyse THREE alternative solutions to the problem that you identified.

• You should explain how each solution would overcome the problem
• You should also identify any problems arising from the solutions.

Task 2-

It is now July 2016 and the profit and loss budget variance has been prepared showing the budgeted and the actual figures for the period ending30th June 2016.  Refer to Excel Spreadsheet 2.

You are required to complete the A/F and percent columns and prepare brief notes for your manager.  The notes should answer the following questions:

a. Identify the THREE significant (largest) variances.  Include the level of the significance and state whether favourable or adverse.

b. Analyse the THREE variances that you identified.

• You should identify the possible causes of each variance
• You should provide possible recommendations on how to overcome or prevent the variance in the future.

Attachment:- Data.rar