FUNCTIONAL BUDGETS

Prontor Limited provides the following data for the year ending 31 December Year
3:

Finished Goods Z Y

Expected sales(units) 4,000 9,000

Selling price RM12 RM20
Planned ending inventory 400 700
Beginning inventory 200 350

Additional information for Prontor Limited is as follows:

Direct Materials M12

M121
2
Beginning inventory (kg) 1,50
Planned ending inventory (kg) 0
1,000
Cost per unit 3,00
2,000
0
RM1
R
M2
Each unit of Product Z requires 2 kg of M121, 1 kg of
M122
Each unit of Product Y requires 2 kg of M121, 2 kg of
M122.

REQUIRED:
(a) Sales Budget
(b) Production Budget
(c) Materials Purchases Budget.

1. MA Bhd is preparing its annual budget for the year ended 31 December 2011. It
makes and sells one product for RM80 per unit. It proposes to increase the
price to RM100 per unit from 1 Apr 2011. The expected sales for each quarter
of 2011 are as follows;

Quarter 1 Quarter 2 Quarter 3 Quarter 4

5,000 units 6,000 units 4,000 units 5,000 units

Sales for each quarter of 2012 are expected to be 5,500 units.

Standard costs and usage of raw material per unit of output are:

A 2kgs at RM3 per unit

B 5kgs at RM2 per unit

On 31 December 2010, the stocks are expected to be :

Finished goods : 800 units

Material A : 500 kgs
Material B : 750 kgs

Closing stocks at the end of each quarter are to be as follows :

Finished goods :5% of next quarter’s sales
Material : 2% of next quarter’s production

Required :

Prepare the following budgets for each quarter for the year ending 31 December
2011.

(a) Sales budget (in units and RM)

(b) Production budget (in units)

(c) Materials purchases budget for each product (in kgs and RM)

2. A company manufactures three products using five types of raw material.

Extracts from the standard cost data are set out below:

Raw Material P Q R S T
Standard price (RM per kilo) 11.70 17.45 8.75 2.90 13.75

Kilos of material per unit of:

Product K 1 - 4 - 2
Product L 2 1 3 1 -
Product M 2 1 4 1 2

Budgets are being prepared for the year ahead. During the first four week
period@ period 1 in the budget year, sales have been budgeted as:
Selling Price
Product K 12,600 units RM25
Product L 18,000 units RM35
Product M 7,200 units RM30

Stock at the beginning of period 1 is expected to be:

Raw material: Finished goods:

Material P 43,200 kg Product K 5,200 units
Material Q 15,600 kg Product L 4,800 units
Material R 85,400 kg Product M 4,250 units
Material S 35,200 kg

2
 Material T 28,500 kg

It is planned to reduce the finished goods stock of all products by 10% by the
end of the period 1. Stocks of raw material are considered to be too high and
a reduction of 20% is planned by the end of period 1.

Required:

Prepare the following budgets for the first four week period in the budget year:

(i) Sales budget

(ii) Production (units of each product)
(iii) Raw material purchases (kg of each material)

Prontor Limited( Refer to Question 1)

Direct Labour
Each unit of Product Z requires:
Skilled labour - 1 hour
Unskilled labour - 2 hours
Each unit of Product Y requires:
Skilled labour - 1.5 hour
Unskilled labour - 3 hours
The company pays all direct labour at an hourly rate of RM8.00 for skilled
labour and RM5.00 for unskilled labour.

REQUIRED: The Direct Labour Budget.

Bronco Ltd is preparing its budgets for the first six months of 2005. It manufactures
and sells one product, Product Z, which uses two different raw materials in its
production.

The current selling price of product Z is RM250 per unit. It is planned to

increase this price by RM25 per unit from 1 May 2005 to compensate for an
expected increase of 10 % in the cost of both raw materials and a 6% rise in
direct labour cost, which are due to take effect from 1 April 2005.

Sales units in 2005 are expected to be:

January 500 May 500

February 550 Jun 580
March 630 July 620
April 650

The following current usage and cost information per unit of product Z is
available:

Material A 5 kg @ RM4 per kg

Material B 7 kg @ RM6 per kg
Skilled direct labour 5 hrs @ RM7.50 per hour

3
Unskilled direct labour 3 hrs @ RM4.80 per hour

From February 2005, Bronco Ltd plans to hold closing stock of product Z
equal to 20 % of the next month sales. Raw material will be purchased two
weeks before they are required for production. Assume each month consists
for exactly four weeks.

Opening stocks in 1 February 2005 are expected to be:

Product Z 110 units

Material A 1,415 kg
Material B 1,981 kg

Required:

You are required to produce the following budgets for each of the months of
February, March, April and May 2005:

(i) Sales budgets (RM)

(ii) Production budget (Units)
(iii) Material purchased budgets (kg and RM)
(iv) Labour budgets (hours and RM) for each of skilled and unskilled.

4
Assignment 1
DAC0143
Due Date: 23 Dec 2010

Gromix plant food is made by planting two chemical ingredients, purchase price
of A is RM0.10 per kilogram and B is RM0.40 per kilogram.

The product is sold to farmers and market gardeners in returnable sacks, each
containing 50 kilograms. Current stock levels of ingredients and finished
product are known by management to be excessive and it has decided to aim
at having lower levels in future. Expected stock levels are as follows:

Gromix Gromix Gromix

A B No.1 No.2 No.3
Kg Kg Sacks Sacks Sacks
As at 1 January 2005 36,000 30,000 150 160 130
As at 31 December 24,000 17,000 50 60 30
2005

Other particulars are:

Gromix Gromix Gromix
No.1 No.2 No.3
Standard Mix
Ingredient A 40kg 30kg 10kg
Ingredient B 10kg 20kg 40kg
Selling price per sack RM22 RM25 RM32
Estimated sales 2005 5000 sacks 6000 sacks 3000 sacks

Required:

Produce the following budgets

(i) Sales budget (sacks and RM)

(3 marks)
(ii) Production budget (sacks)
(4 marks)
(iii) Material usage (kg)
(7 marks)
(iv) Material purchase (RM)
(6 marks)

--GOOD LUCK--