- 20 Marks
IMAC – Mar 2023 – L1 – Q2 – Budgeting | Cost and Cost Behaviour
Prepare functional budgets for sales, production, and direct material purchases for Naa Sei enterprise.
Question
Naa Sei enterprise wishes to prepare his functional budgets for the year 2023. The following information has been provided.
Sales
| Year | Quarter | Units |
|---|---|---|
| 2023 | 1 | 1,200 |
| 2023 | 2 | 1,500 |
| 2023 | 3 | 2,000 |
| 2023 | 4 | 1,800 |
2024
| Year | Quarter | Units |
|---|---|---|
| 2024 | 1 | 2,200 |
| 2024 | 2 | 2,300 |
The projected selling price is GH¢15 for the first two quarters, and this will increase by 10% in the third quarter. There will be no further price increase.
Inventory policy
i) Finished Goods: The company plans to keep 10% of the following quarter’s sales quantity. The opening inventory of finished goods is 120 units.
ii) Direct Materials: Only one material is used in production. 5 kilograms of the material are required for the production of a unit of a product. Closing inventory is expected to be 20% of the following quarter’s requirement. The cost of material is expected to be GH¢2 per kilogram.
Required:
Prepare the following functional budgets for each of the four quarters in 2023.
a) Sales
b) Production
c) Direct material purchases in value
Find Related Questions by Tags, levels, etc.
- Tags: Direct Material Purchases, Functional Budgets, Production Budget, Sales Budget
- Level: Level 1
- Topic: Budgeting, Cost and Cost Behaviour
- Series: MAR 2023