Task 3: Budgetary Process (LO3) Be able to participate in the budgetary process of an organisation Scenario 4 Sandyfoot Ltd uses cost plus approach while the company’s purchases are sold ad cost plus 20%. a) January February March April Budgeted sales Labour cost Expenses incurred in month in month in month £ £ £ 30,000 2,500 3,000 50,000 3,000 5,000 150,000 4,000 6,000 110,000 5,000 8,000 b) expenses include a monthly depreciation charge of £3000, Labour is paid in full by the end of each month c) i) 50% of sales are for cash ii) 50% of sales are on one month’s credit d) Sandyfoot Ltd will buy equipment costing £20,000 for cash in February and will pay dividend of £22000 in March. The opening cash balance at 1 February is £1500 You are required to: 3.1 Select an appropriate budgetary targets for Sandyfoot Ltd on the basis of scenario outlined above. 3.2 Prepare a cash budget for February and March for Sandyfoot Ltd so as to participate in the creation of a master budget for this organisation 3.3 Explain the techniques that can be used to compare actual expenditure and income to the master budget of an organisation 3.4 Evaluate budgetary monitoring processes that can be used by Sandyfoot Ltd so as to control the unfavourable variances
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