KIY Ltd is a manufacturing organisation that supplies a single product. The business is preparing its budgets for the year to 31^st August 2021. The opening statement of financial position (balance sheet) and budgeted cash account of the business are reproduced below.

KIY Ltd – Statement of Financial Position (Balance Sheet)

as at 31^st August 2020

	£	£
Fixed assets (NBV)		240,000
Current assets:
Inventory: Direct materials	6,000
Inventory: Finished goods	23,400
Trade receivables	75,000
Prepaid administration expenses	3,600
Bank and cash accounts	3,700
	111,700
Current liabilities:
Trade payables	20,000
Accrued loan interest	3,500
	23,500
Net current assets:		88,200
Long-term loans		100,000
		228,200
Capital and reserves:
Ordinary shares		170,000
Retained profits		58,200
		228,200

KIY Ltd

Cash and Bank Budget for the year ending 31st August 2021
	£		£
Balance B/d	3,700	Trade payables payments	270,000
Trade receivables receipts	895,000	Direct labour wages	227,500
Long-term loan	50,000	Indirect production overheads	66,500
		Selling and distribution costs	90,000
		Administration expenses	79,000
		Loan interest payments	9,500
		Taxation payments	40,000
		Dividend payments	95,000
Balance c/d	4,800	Fixed asset acquisitions	76,000
	953,500		953,500

The following further budget data and information is available to you:

• The sales budget of KIY Ltd for the year to 31^st August 2021 is for 44,000 units at £21 per unit. Trade creditors are for direct materials only.
• Each finished production unit requires direct materials costing £6.00 and direct labour costing £5.00. Closing inventory of direct materials will have a value of £7,000. The business does not maintain any work-in-progress inventory.

• Finished goods inventories are valued at the current full unit cost of production. The opening finished inventory valuation represents 1,800 units and the closing inventory is expected to be 2,400 units.
• Depreciation values for the year to 31^st August 2021 are planned at:

	Depreciation £
Indirect production overhead	24,500
Selling and distribution costs	4,500
	29,000

• The administration expenses charge to the income statement (profit and loss account) is expected to be £77,000 and the closing accrual on the loan interest account will be £4,000.  

Required:

1. Prepare the following budget reports for KIY Ltd:

1. Manufacturing account for the year ending 31^st August 2021.

2. Income statement (Trading, profit and loss account) for the year ending 31^st August 2021.

3. Statement of Financial Position (Balance sheet) as at 31^st August 2021.

Describe Activity-Based Budgeting (ABB) and discuss ABB as a means to potentially improve management planning and control information.

Answer rating: 100% (QA)

a Note the workings are correct there is a difference of 13100 in the balance sheet which is shown in the overdraft acount please note the same and pls follow up for any queries i Manufacturing Accoun... View the full answer