Pedro Sdn Bhd. manufactures and sells two cookware products in a single plant. The new manager wants to have quarterly budgets and has prepared the following information for the first quarter of 2021. The following information is available: Budgeted sales: Product A …….60,000 units @RM100 each Product B …….40,000 units @RM125 each Budgeted inventories: Beginning Ending Product A Product B Direct material (Metal) Direct material (Plastic) Direct material (Handles) 20,000 8,000 32,000 kg 29,000 kg 6,000 units 25,000 10,000 36,000 kg 32,000 kg 7,000 units Standard variable costs: Product A Product B Direct materials: Metal Plastic Handles Total materials 5kg @RM8.00 3kg@RM5.00 1 unit @RM3.00 RM40.00 15.00 3.00 58.00 4kg @RM8.00 3kg@RM5.00 RM32.00 15.00 47.00 Direct labour Variable manufacturing overhead Total 2hours@RM12.00 2hours@RM1.50 24.00 3.00 85.00 3hours@RM16.00 3hours@RM1.50 48.00 4.50 99.50 Variable manufacturing overhead cost is RM384,000 while fixed factory overhead is RM214,000 per quarter (including non-cash expenditure of RM156,000) and is allocated on total units produced. Financial information are as follows: Beginning cash balance is RM1,800,000 Sales are on credit and are collected 50 percent in the current period and the remainder in the next period. Last quarter’s sales were RM8,400,000. There are no bad debts. Purchases of direct materials and labour costs are paid for in the quarter acquired. Manufacturing overhead expenses are paid in the quarter incurred. Selling and administrative expenses are all fixed and are paid in the quarter incurred. They are budgeted at RM340,000 per quarter, including RM90,000 of depreciation. Required: For the first quarter of 2021, prepare the following: 1. Sales budget. 2. Production budget in units. 3. Direct materials usage and purchase budget (Metal, Plastic, Handles). 4. Direct labour budget.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Task 1
Pedro Sdn Bhd. manufactures and sells two cookware products in a single plant. The new manager wants to have quarterly budgets and has prepared the following information for the first quarter of 2021. The following information is available:
Budgeted sales:
Product A …….60,000 units @RM100 each
Product B …….40,000 units @RM125 each
Budgeted inventories:
|
|
Beginning |
Ending |
|
Product A Product B Direct material (Metal) Direct material (Plastic) Direct material (Handles) |
20,000 8,000 32,000 kg 29,000 kg 6,000 units |
25,000 10,000 36,000 kg 32,000 kg 7,000 units |
|
|
Product A |
Product B |
||
|
Direct materials: Metal Plastic Handles Total materials |
5kg @RM8.00 3kg@RM5.00 1 unit @RM3.00 |
RM40.00 15.00 3.00 58.00 |
4kg @RM8.00 3kg@RM5.00
|
RM32.00 15.00
47.00 |
|
Direct labour Variable manufacturing overhead Total |
2hours@RM12.00
2hours@RM1.50 |
24.00
3.00 85.00 |
3hours@RM16.00
3hours@RM1.50 |
48.00
4.50 99.50 |
Variable
Financial information are as follows:
- Beginning cash balance is RM1,800,000
- Sales are on credit and are collected 50 percent in the current period and the remainder in the next period. Last quarter’s sales were RM8,400,000. There are no
bad debts. - Purchases of direct materials and labour costs are paid for in the quarter acquired.
- Manufacturing overhead expenses are paid in the quarter incurred.
- Selling and administrative expenses are all fixed and are paid in the quarter incurred. They are budgeted at RM340,000 per quarter, including RM90,000 of depreciation.
Required:
For the first quarter of 2021, prepare the following:
1. Sales budget.
2. Production budget in units.
3. Direct materials usage and purchase budget (Metal, Plastic, Handles).
4. Direct labour budget.
Task 2
Financial information pertaining to Pedro Sdn. Bhd.asfollows:
- Beginning cash balance is RM1,800,000
- Sales are on credit and are collected 50 percent in the current period and the remainder in the next period. Last quarter’s sales were RM8,400,000. There are no bad debts.
- Purchases of direct materials and labour costs are paid for in the quarter acquired.
- Manufacturing overhead expenses are paid in the quarter incurred.
- Selling and administrative expenses are all fixed and are paid in the quarter incurred. They are budgeted at RM340,000 per quarter, including RM90,000 of depreciation.
Required:
Refer to the sales budget prepared in Task 1. Construct a
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