SEU What Are the Characteristics of Flexible Budgets Case Study Questions

Question Description

Q1.What are the Characteristics of Flexible Budgets? Give an example of Saudi Company that prepare them

Q2. Karim Corporation is considering two alternatives that are code-named A and B. Costs associated with the alternatives are listed below:

	Alternative A	Alternative B
Supplies costs	SAR 33 000	SAR 33 000
Assembly costs	SAR 48 000	SAR 51 000
Power costs	SAR 32 000	SAR 22 000
Inspection costs	SAR 11 000	SAR 27 000

Required:

a. Which costs are relevant and which are not relevant in the choice between these two alternatives?
b. What is the differential cost between the two alternatives?

Q3. Mushrif Company has projected sales and production in units for the second quarter of 2017 as follows

Particular	April	May	June
Sales	35,000	25,000	30,000
Production	30,000	25,000	40,000

Cash production costs are budgeted at SAR7 per unit produced. Of these production costs, 30% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses (all paid in cash) amount to SAR 70,000 per month. The accounts payable balance on March 31 totals SAR 100,000, all of which will be paid in April.

Assume that all units will be sold on account for SAR20 each. Cash collections from sales are budgeted at 70% in the month of sale, 20% in the month following the month of sale and the remaining 10% in the second month following the month of sale. Accounts receivable on March 31 totaled SAR 300,000.

Required

A. Prepare a schedule for each month showing budgeted cash disbursements for Mushrif Company.

B. Prepare a schedule for each month showing budgeted cash receipts for Mushrif Company.

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