Question

Jaka Sdn Bhd., manufactures and sells concrete blocks for residential and commercial building. Jaka expects the following sales unit, price per unit and desired ending inventory for year 2021.

	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Sales unit	2,000,000	6,000,000	6,000,000	2,000,000
Price/unit (RM)	0.70	0.70	0.80	0.80
Ending Inventory	500,000	500,000	100,000	100,000

Inventories for both 1^st January 2021 and 1^st January 2022 are expected to be 100,000 blocks.

The raw materials and direct labour required for each concrete block are as follows:

	Units	Cost
Raw materials	26kg	RM0.01/kg
Direct labour	0.015 hour	RM14/hour

Jaka’s policy is to have 5 million kg of raw materials in ending inventory for the third and fourth quarters and 8 million kg of the materials in ending inventory for the first and second quarters.

Required:

Prepare the following budgets for the year 2021: -

1. Sales budget. Show total sales by quarter and in total for the year.                                    

2. Production budget. Show total production unit by quarter and in total for the year.   

3. Direct material usage and purchase budget.

4. Direct labour budget.

Answer 1

Sr. No.	Sales Budget	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year 2021	Remarks
1	Sales units	2,000,000	6,000,000	6,000,000	2,000,000	16,000,000
2	Price/unit	0.70	0.70	0.80	0.80
3	Sales value	1,400,000	4,200,000	4,800,000	1,600,000	12,000,000	1 X 2

Sr. No.	Production budget	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year 2021	Remarks
1	Opening Inventory	100,000	500,000	500,000	100,000	100,000
2	Add: Sales units	2,000,000	6,000,000	6,000,000	2,000,000	16,000,000
3	Less: Closing inventory	-500,000	-500,000	-100,000	-100,000	-100,000
4	Production units	1,600,000	6,000,000	6,400,000	2,000,000	16,000,000	1 + 2 - 3

Sr. No.	Material usage and purchase budget	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year 2021	Remarks
1	Production units	1,600,000	6,000,000	6,400,000	2,000,000	16,000,000
2	Raw material usage (26kg per block)	41,600,000	156,000,000	166,400,000	52,000,000	416,000,000	2 X 26kg
3	Add: Opening stock of Raw material	5,000,000	8,000,000	8,000,000	5,000,000	5,000,000
4	Less: Closing stock of Raw material	-8,000,000	-8,000,000	-5,000,000	-5,000,000	-5,000,000
5	Raw material purchased in units	38,600,000	156,000,000	169,400,000	52,000,000	416,000,000	2 + 3 - 4
6	Raw material cost (RM 0.01/kg)	386,000	1,560,000	1,694,000	520,000	4,160,000	5 X RM0.01

Sr. No.	Labour Budget	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year 2021	Remarks
1	Production units	38,600,000	156,000,000	169,400,000	52,000,000	416,000,000
2	Labour in hrs (0.015 hrs per unit)	579,000	2,340,000	2,541,000	780,000	6,240,000	1 X 0.015 hrs
3	Labour cost (RM14/hr)	8,106,000	32,760,000	35,574,000	10,920,000	87,360,000	2 X RM 14