Question

XYZ Sdn Bhd is preparing budget for the year ended 31st December 2016. The company manufactures and sellls one product at RM5 each but this will increase to RM6 from 1st July 2016. The budget sales volume are:

Units
January to June 9,000
July to December 6,000

Sales for January to June 2017 is expected to be 12,000 units. Closing stocks is budgeted at 10% of the next six month period’s sales. No stocks of components are held.

Each unit of product uses two components with the usage current unit price as follows:

Usage Unit price
Component A 3 units RM10
Component B 2 units RM6


Component A is expected to increase in price by 10% from July 2016. Labor cost for the product is RM30 per unit. Variable production overhead will be at RM10 per unit and fixed production overhead is budgeted at RM250,000 for the year.

Required:

Prepare the following budgets for XYZ Sdn Bhd for each of the two six-month periods of 2016.

a) Sales budget.                                                                                                       (1 mark)
b) Production volume budget.                                                                               
c) Production cost budget.               

Answer 1

There is some technical fault in question, since selling price is only 5 per unit, but labor cost per unit itself is 30 per unit. But i have answered it using given figures

a.

Sales Budget
	January to June	July to December	Total
Expected Sales units	9000	6000	15000
Sales Price per unit	5.00	6.00
Expected Sales Revenue	45,000	36,000	81,000

b.

Production Volume Budget
	January to June	July to December	Total
Expected Sales units	9000	6000	15000
Add Desired ending inventory	600	1200	1200
Total Requirements	9600	7200	16200
Less Beginning Inventory	900	600	900
Required Production Volume (Units)	8700	6600	15300

c.

Production Cost Budget
	January to June	July to December	Total
Material Cost per unit
Component A	30.00	33.00
Component B	12.00	12.00
Labor Cost	30.00	30.00
Variable Overhead	10.00	10.00
Total Variable Material Cost per unit	82.00	85.00
Required Production Units	8700	6600
Total Variable Material Cost	713,400	561,000	1,274,400
Fixed Overhead	125,000	125,000	250,000
Total Production Cost	838,400	686,000	1,524,400