Question

BugControl Ltd produces and sells bug repellent. Information about the budget for the last quarter of year 20X1 is as follows:

1. The company expects to sell 40,000 bottles of BugControl in September, 55,000 in October, 93,000 in November, and 36,000 in December. The selling price of BugControl is $8.95 per bottle.
2. The desired ending inventory of finished goods is equal to 20% of next month’s sales whereas the desired ending inventory for material is 15% of next month’s production requirements.
3. At the beginning of October, the company expects to have 57,000 grams of Chemical A, and 97,000 grams of Chemical B on hand.
4. A bottle of BugControl requires 6 grams of Chemical A and 10 grams of Chemical B. The cost of Chemical A is 12 cents per gram, the cost of Chemical B is 9 cents per gram.
5. The cost of direct labour is 60 cents per bottle and the cost of variable overhead is 90 cents per bottle. Fixed manufacturing overhead is $40,000 per month.
6. Variable selling and administrative expense is 12% of sales and fixed selling and administrative expense is $65,000 per month.

Required:

1. Prepare the Sales Budget for the last quarter of the year 20X1.
2. Prepare the Production Budget for October and November of the year 20X1.
3. Prepare a Direct Materials Purchases Budget for both chemicals for October 20X1.
4. Prepare the following budgets  for October 20X1:
   1. Direct Labour Cost
   2. Factory Overhead Cost
   3. Selling and Administrative Expenses
5. 4. Production unit cost computations (Assume the fixed overhead cost per unit is $0.82) and Cost of Goods Sold Budget
   5. Budgeted Income Statement

Answer 1