Page 154 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Unit 8: Budgetary Control

1. The calculation of salesmen’s commission is on the basis of the sales volume generated Notes
by the salesmen force. The total sales volume consists of two different parts viz. Sales

contributed by the sales force and another one is contribution of the agents. To find out the
sales volume of the sales man, the portion of the agents’ sales volume should be deducted
from the total sales volume.
Sales Force’s/Men’s Volume = Total Sales Volume – Agent’s Sales Volume

Similarly, the agents’ sales volume can be computed.
2. From the early step, the amount of commission is to be computed from the volume of
sales.
3. Carriage outward should be computed on the volume of sales.

Sales Overhead Budget for the Year 2006
Estimated Sales ` 80,000 Level ` 1,00,000 Level
Fixed Overhead
Advertisement on Radio 2,000 2,000
Advertisement on TV 12,000 12,000
Salary to Sales Admin. Staff 20,000 20,000
Salary to Sales force 15,000 15,000
Expenses of the sales dept – Rent 5,000 5,000
Total Sales Fixed Overhead (A) 54,000 54,000
Variable Overhead
Salesmen’s Commission 2% 1,440 10,290
Agents’ Commission 6.5% 520 682.5
Carriage outward 5% 4,000 5,000
Total Variable Overhead (B) 5,960 5682.5
Total Sales overhead(A+B) 59,960 59682.5
8.3.5 Cash Budget

Cash budget is nothing but an estimation of cash receipts and cash payments for specifi ed period.
It is prepared by the head of the accounts department, i.e. chief accounts offi cer.
The utility of the cash budget is as follows:
1. To meet the revenue and capital expenditures with adequate funds.

2. It should highlight the additional requirement cash whenever the need arises.

3. Keeping of excessive funds available in the business firm would not fetch any return to the
enterprise but this estimate of future cash needs and resources will guide the firm to plan

for an effective investment out of the surplus funds estimated; enhances the wealth of the
investors through proper investment planning out of the future funds available.
Cash budget can be prepared in three different ways:

1. Receipts and payments method
2. Adjusted profit and loss account

3. Balance Sheet Method
Cash receipts can be classified into various categories.

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