Identify the type of budget used for EACH of the following scenarios:
4.1.1 A farmer wants to add a new processing unit to the farm - NSC Agricultural Management Practices - Question 4 - 2022 - Paper 1
Question 4
Identify the type of budget used for EACH of the following scenarios:
4.1.1 A farmer wants to add a new processing unit to the farm.
4.1.2 A farmer needs seasonal ... show full transcript
Worked Solution & Example Answer:Identify the type of budget used for EACH of the following scenarios:
4.1.1 A farmer wants to add a new processing unit to the farm - NSC Agricultural Management Practices - Question 4 - 2022 - Paper 1
Step 1
4.1.1 A farmer wants to add a new processing unit to the farm.
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Answer
The type of budget used for this scenario is a Capital Budget. This budget is specifically designed to evaluate major investments or expenditures for long-term assets such as purchasing new processing units.
Step 2
4.1.2 A farmer needs seasonal workers during the harvesting season.
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For hiring seasonal workers, a Labour Budget is appropriate. This budget identifies labor costs associated with the specific time of year, such as during the harvest season when extra workers are needed.
Step 3
4.1.3 Expected flow of money as income and expenditure through an enterprise.
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This scenario relates to a Cash Flow Budget. A cash flow budget monitors the inflow and outflow of cash within an enterprise to ensure liquidity for daily operations.
Step 4
4.1.4 A farmer wants to have the totals of the possible income and the possible expenditure of the different production enterprises as one combined document.
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In this case, a Whole Farm Budget is utilized. This budget consolidates all potential incomes and expenditures across various production activities into a single financial document.
Step 5
State THREE main features of a cash-flow budget.
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Monitoring Income and Expenses: The cash-flow budget tracks actual cash inflows and outflows to reflect the financial status.
Timing of Cash Flows: It indicates the time at which cash is expected to be received or expended, which can greatly affect farm liquidity.
Planning for Future Financial Needs: It helps in forecasting future cash needs to ensure that the business can meet obligations and make informed decisions.
