- 15 Marks
MA – Mar 2024 – L2 – Q2a – Budgetary Control
This question involves preparing sales budgets for gasoline and diesel and a production budget based on crude oil requirements for the first three months.
Question
Squash Refinery has planned the following monthly sales for the first four months in the year:
| Months | 1 | 2 | 3 | 4 |
|---|---|---|---|---|
| Gasoline (litres) | 140,000 | 200,000 | 220,000 | 250,000 |
| Diesel (litres) | 100,000 | 130,000 | 180,000 | 210,000 |
The proposed ex-refinery prices are GH¢12.5 and GH¢10.8 per litre for gasoline and diesel respectively.
One metric tonne of crude oil when processed can yield 2,000 litres of gasoline and 2,500 litres of diesel. The inventory policy of the company is as follows:
- Closing inventory at the end of each month: Twice the monthly sales for gasoline and 150% of the monthly sales for diesel.
- Opening inventory: Gasoline – 200,000 litres, Diesel – 180,000 litres, and Crude – 140 metric tonnes.
Note: The purchase of crude is based on the production requirement for gasoline.
Required:
i) Prepare the sales budget for gasoline and diesel for the first three months. (3 marks)
ii) Calculate the quantity of crude oil to be purchased for the first three months. (12 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Crude Oil, Diesel, Gasoline, Inventory Management, Production Budget, Sales Budget
- Level: Level 2
- Topic: Budgetary control
- Series: MAR 2024
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