- 20 Marks
MI – Nov 2015 – L1 – SB – Q2 – Budgeting
Compiles functional budgets for sales, production, and material purchases for six months.
Question
ABC Limited is engaged in the production of AiBiCi product and the following data were extracted from the Budget Committee’s Report:
i. Sales is expected to be 20,000 units each in months 1 and 2, this will increase by 10% each in months 3 and 4, and 5% each in months 5 and 6.
ii. Unit selling price is currently estimated at N250, and due to increased awareness, the price will move up to N300 in the fourth month.
iii. To produce one unit of AiBiCi, the following materials are required:
- 2kgs of A @ N20/kg
- 5kgs of B @ N5/kg
- 2kgs of C @ N10/kg
iv. The company keeps 10% of estimated sales as closing inventory for the month. Assume no opening inventory for month 1.
You are required to compile, in tabular form, the following functional budgets for the next 6 months:
a. Sales in quantity and value. (6 Marks)
b. Production in quantity. (6 Marks)
c. Material purchase in quantity and the total cost. (8 Marks)
(Total 20 Marks)
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