Question 1: – Cash Budget:

Estimated sales January February March April May
Total Coffee sales (units) 15,000 16,000 17,500 18,000 14,500


Your friend, Chris Coffee, has been running a successful coffee shop for the last couple of years.  He has asked you to put together a cash budget.  His regular accountant was too busy to help, but told Chris his depreciation expense was going to be $1,800 per year, using the straight-line method.  He has supplied you with the following information (above) to help you put together his cash budget.

The revenue for a coffee is $5 for a large, $4 for a medium and $3 for a small.  50% of his sales are Large coffees, 25% medium and 25% smalls.  Chris has a deal with an accounting company and half of the coffees sold are on account, the other half pay cash.  The accounting company pays for the coffees the month after the sale.  Assume credit sales are half of the total coffee sales.

Material and Labour information Chris has provided:

Large Medium Small
Labour hours 0.1 0.05 0.05
Coffee pods 3 2 1
Cost of a Coffee pod $0.90

Labour is paid at $20/hour.  The Coffee pods need to be ordered a month in advance.  He requires 10% of next months total coffee pods to be on hand.  The beginning coffee pod inventory, February 1, was 3,000 pods.  50% of the Coffee pods are paid in the month they are ordered, 50% are paid the following month.

Other information Chris has provided:

February March April May
Rent 2,500 2,500 2,500 2,500
Dividend 3,000 15,000
Office and Admin 3,500 3,500 3,500 3,500


NOTE:  Chris requires a minimum bank balance of $5,000 at the end of the month and the ending January bank balance is $10,000.  Chris has access to a line of credit of $500,000 at an interest rate of 30%.  Borrowings are made at the beginning of the month and repayments are made at the end of the month.



Using the Excel file included with the exam, for the months of February, March and April prepare

  • Sales Budget, with a cash receipts.
    • What is the A/R at the end of the month?
  • Materials Budget, with cash disbursements.
    • What is the A/P at the end of the month?
  • Direct Labour Budget
  • Cash budget


Question 2: Flexible Budget

You have recently taken over as the General Manager for Eagle Point golf club.  The most recent monthly Budget versus Actual Income Statement ended June has been supplied below (as well in the excel template file).

Eagle Point Golf Club
Income Statement
For the Month ended June
Budget Actual
Number of golf rounds 6,000 5,000
Golf Rounds 270,000 220,000
Power Carts 150,000 125,000
420,000 345,000
Variable Costs
Labour 114,000 105,000
Golf Cart fuel 3,000 2,500
Maintenance 108,000 70,000
Small Tools 25,000 20,000
Depreciation 2,400 2,000
252,400 199,500
Fixed Costs
Management Fees 35,000 35,000
Rent 35,000 35,000
Utilities 7,500 8,000
77,500 78,000
Income (Loss) before taxes 90,100 67,500



The owner of the golf course is mad about the results, however you are not so confident on that assumption.


  • Prepare a flexible budget to actual income statement

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