Question

You need to prepare the budget forYellow tree for the quarter ending June2018. The budget must be preparedmonthly. The quarter consists of 13weeks. The forecasted sales are as follows:

 

 

April

 

4 weeks

May

 

5 weeks

June

 

4 weeks

July

 

4 weeks

Sales Units

1,250

1,500

1,750

1,800

 

The company’s policy changed theinventory policy to keep closing inventoryof completed units at 25% of thefollowing month’s sales. Openinginventory on the 1st of April was 475units.  The labour information is as follows:

 

Normal workinghours

8 hours per day

Weekend work

None, only if overtimeis required.

Number of employees

20 currently

 

Additional 10employees will beemployed for themonth of June

Normal time rate

R32.50 per hour

Overtime rate

30% above normaltime rate per hour

Hours per unit

3 hours

 

Required:

1.    Calculate the production budgetfor the quarter.                                                      (3)

 

2.    Calculate the budgeted labourhours per month. Split the hoursbetween normal time andovertime.                                                                                                           (9)

3.    Calculate the budgeted labourcost monthly. Split the costbetween normal time and overtime.                                                                                                                  (6

Answer 1

1.

Production Budget
	April	May	June	Total
Sales	1,250	1,500	1,750	4,500
Add: desired end inventory	375	438	450	450
Less: Opening Inventory	475	375	438	475
Production Budget	1,150	1,563	1,763	4,475

Budgeted Labour Hours
	April	May	June	Total
No of employees	20	20	30	20
No of hours	8	8	8	8
weeks	4	5	4	4
No of days	20	25	20	20
Normal Time	3,200	4,000	4,800	12,000
Units to be produced	1,150	1,563	1,763	4,475
No of units per unit	3	3	3	3
Total no of hours required	3,450	4,688	5,288	13,425
Overtime	250	688	488	1,425

Budgeted Labour Cost
	April	May	June	Total
Normal Time	3,200	4,000	4,800	12,000
Rate per hour	32.5	32.5	32.5	32.5
Normal Labour Cost	104,000	130,000	156,000	390,000
Overtime	250	688	488	1,425
Rate per hour	42.3	42.3	42.3	42.3
Overtime Labour Cost	10,563	29,047	20,597	60,206
Total Labour Cost	114,563	159,047	176,597	450,206