(a) What is meant by the terms:
(i) Budget
(ii) Operating budget
(iii) Master budget?

(b) The information below relates to the business of Madingley Ltd:

The following is a schedule of the budgeted income and expenditure for the six months ended 30 November 2017 (£000):

(i) Generally, materials are paid for two months after receipt, and customers pay on average after three months.
(ii) Payments outstanding for materials at 1 June 2017 were: April £38,500; May £43,700.
(iii) Accounts receivable were: March £194,300; April £203,600; May £196,500.
(iv) Wages are to be paid in the month in which they fall due.
(v) Overheads are to be paid one month after they are incurred: the figure for May was £127,400.
(vi) Inventory of raw materials are to be kept at £91,700.
(vii) The inventory of finished goods at 30 November 2017 are to be £136,200.
(viii) There is no inventory of semi-finished items on 31 May 2017, and none are expected in inventory on 30 November.
(ix) 40% of the overheads are to be considered as fixed.
(x) Depreciation on plant and machinery is to be allowed at 10% per annum on cost; the fixtures and fittings are thought to have a value at 30 November of £980.
(xi) There are no sales of finished goods or purchases of raw materials for cash planned during
the period.
Prepare:
(a) A forecast operating statement for the period June to November 2017; and 

(b) A forecast statement of financial position as at 30 November 2017.

Transcribed Image Text:

Non-current assets Land and buildings Plant and machinery Fixtures and fittings Statement of Financial Position as at 30 May 2017 (£000) Current assets Inventory: Raw materials Finished goods Accounts receivable Bank Less Current liabilities Accounts payable: Raw materials Overheads Net assets Equity Share capital Retained profits Cost 134.00 9.40 2.30 145.70 Aggregate depreciation 3.76 1.05 4.81 91.70 142.40 594.40 12.40 82.20 127.40 500.00 272.19 Book value 134.00 5.64 1.25 145.89 845.90 981.79 (209.60) 772.19 772.19