Question

Map071 Shop specializes in producing and selling pouch bags. Currently, there is only one type of pouch bag being produced and sold by the shop, namely Baby On. The newly designed pouch bag is carefully produced by the business owner, Ms. Meisa. The materials are specially purchased from the best supplier in town and the processes are followed under strict quality control. The selling price for Baby On is RM42 per unit.

The following information is gathered for the purpose of preparing relevant budgets for the third quarter of 2020.   

(i)  The budgeted sales quantity for the quarter are shown below:

July	210 units
August	240 units
September	280 units

(ii) The pencil case will be using one type of direct material, which is the heavyweight strecthy lycra fabric. Each unit of Baby On will require 0.4 meter of lycra fabric. The cost of the fabric is estimated to be RM10 per meter.

(iii)  Every unit of Baby On will need 4 hours of direct labour hour and the rate for the direct labour is set to be at RM9 per hour.

(iv)  It is estimated that budgeted stock of finished goods are 70 units of Baby On at the beginning of July 2020. Additionally, the company also wishes to maintain monthly closing inventories of the pouch bags at 10 units lower than those monthly opening inventories.

(v)  In term of direct materials, the shop plans to keep opening inventories in July 2020 amounting to 20 meter of lycra fabric. At the end of every month, the company intends to maintain 3 meter less of lycra fabric as compared to the opening inventories.

Required:

Prepare the following budgets for the month of July, August and September 2020.

(a)      Sales budget.

  

(b)      Production budget.

(c)     Raw materials usage and raw material purchased.

(d)     Direct labour budget.

(pls show calculation methhod)

Answer 1

Thank you for your patience. Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!

Map071 Shop
Answer a	July	August	September	Total	Note
Budgeted Sales units	210.00	240.00	280.00		A
Sell price per unit	42.00	42.00	42.00		B
Budgeted Sales Revenue	8,820.00	10,080.00	11,760.00	30,660.00	C=A*B
Answer b
Production Budget	July	August	September	Total
Budgeted Sales units	210.00	240.00	280.00		See A
Add: Closing	60.00	50.00	40.00		I= 10 less from J of previous month.
Less: Opening	70.00	60.00	50.00		J= I of previous month.
Production Budget	200.00	230.00	270.00		K
Answer c
Material Purchase Budget	July	August	September	Total
Production Budget	200.00	230.00	270.00		See K
Material required per unit	0.40	0.40	0.40		L
Material Usage Budget	80.00	92.00	108.00		M=K*L
Add: Closing	17.00	14.00	11.00		N= 3 less from O of previous month.
Less: Opening	20.00	17.00	14.00		O= N of previous month.
Material Purchase Budget	77.00	89.00	105.00		P
Cost per meter	10.00	10.00	10.00		Q
Material Purchase cost	770.00	890.00	1,050.00	2,710.00	R=P*Q
Answer d
Direct Labor Budget	July	August	September	Total
Production Budget	200.00	230.00	270.00		See K
Labor Hour required per unit	4.00	4.00	4.00		S
Labor Hour required	800.00	920.00	1,080.00		T=K*S
Cost per Hour	9.00	9.00	9.00		U
Direct Labor Budget	7,200.00	8,280.00	9,720.00	25,200.00	V=T*U