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 for this scenario is a Capital budget. This budget is allocated for long-term investments and significant expenditures such as establishing a new processing unit.
Step 2
4.1.2 A farmer needs seasonal workers during the harvesting season.
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Answer
The appropriate budget for this situation is a Labour budget. This budget accounts for the costs associated with hiring seasonal labor during peak times, such as the harvest.
Step 3
4.1.3 Expected flow of money as income and expenditure through an enterprise.
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For this scenario, the suitable budget is a Cash flow budget. This type of budget forecasts the inflow and outflow of cash within the enterprise, highlighting expected income and expenses.
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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The correct type of budget is a Whole farm budget. This budget consolidates all projected incomes and expenses across various production activities into a single document.
Step 5
State THREE main features of a cash-flow budget.
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Timing: A cash-flow budget indicates when cash is expected to be received and disbursed, which helps in making informed financial decisions.
Record Actual Transactions: It provides a detailed record of actual cash transactions allowing for comparisons with estimates and adjustments as necessary.
Planning and Control: The budget aids in planning for future financial needs and controlling spending by setting cash flow targets.
