SECTION 2 Finance section: (Total Marks : 31

Question 1: Cash Flow Forecasting : Complete the cash flow forecast by calculating the values A to E.
Write your answers in the box below. (10 marks)

Award 2 marks for each correct answer

Jan Feb Mar

£000 £000 £000

Sales 80 B105 120

Payments 90 90 C100
Net cash flow A(10) 15 20

Opening bank 5 (5) D10

balance

Closing bank balance (5) 10 E30

Put your answers here

A (10)

B 105

C 100

D 10

E 30

Question 2: Budgeting (12 marks in total)

a) Complete the monthly sales and cost budget below and identify which variances are adverse
or favourable. (6 marks)

Award 1 mark for each correct line / half a mark for partially correct line

Monthly Sales and Cost Budget: Stella Ltd

Item Budgeted (£) Actual (£) Variance (£) Adverse or

Favourable

Sales Revenue 17,000 16,000 1000 A

COSTS

Material 2,400 2,000 400 F

Wages 5,000 5,500 500 A

Utilities 200 250 50 A

Marketing 700 900 200 A

Other expenses 150 100 50 F

b)

(i) Calculate both the Budgeted profit and the Actual Profit (4 marks, 2 for each
calculation)

Budgeted Profit: Revenue minus Total Costs = 17000 – 8450 = £8550

Actual Profit: £16000 - £8750 = £7250

(ii) Calculate the profit variance and state if adverse or favourable (2 marks)

Variance: £8550 – £7250 = £1300 Adverse

Question 3 Revenue, Costs and Break Even (9 marks in total )

Stefan Ltd manufactures office chairs – Use the following data relating to the business to answer the
questions below:

Annual Fixed Costs £ 72 000

Variable costs (per unit) £ 15
Current yearly output 2 000 units
Selling price per unit £ 95

a) Calculate the total costs for the year (2 marks)

Total Cost = Fixed Cost plus Variable Cost = £72000 + (£15 * 2000units) = 72000+30000 =
£102000

b) Calculate the contribution per unit (2marks)

Contribution = Sales – Variable Cost = £95 - £15 = £80 per unit

c) Calculate the Breakeven Point (3 marks)

BEP = Fixed Cost ÷ Contribution per unit = £72000/£80 = 900 units

d) Calculate the current margin of safety (in units) (2 marks)

Margin of Safety: Target Sales – BEP = 2000 – 900 = 1100 units