CHAPTER 16


Sample Solution (a)


Sales Budget


Expected Sales in Units Selling Price per Unit (x) Budgeted Sales Revenue €


Production Budget Sales required Closing Stock


less Opening Stock Budgeted Production


Why add Closing Stock and subtract Opening Stock in the Production Budget? Ask yourself: Did you produce it this year?


(b)


Raw Materials Purchases Budget Jaipur (1,425 x 2) (1,425 x 3) Agra (1,875 x 4) (1,875 x 5) Total Material Required


Closing stock of Raw Materials


less Opening Stock of Raw Materials Purchases required in kg Purchase Price € Purchase Cost €


This is units and in €. [2] [2]


2,850 7,500


900 [2]


[2] [2]


This is in units.


Jaipur 1,500 250


[3] [2]


1,500 [3]


225


(300) 1,425


[2] [3]


Agra 2,000 300


375,000 600,000 Jaipur


[3]


Agra 2,000 375


(500) 1,875


To find Closing Stock Get 75% of the Opening Stock. This % is given in the question.


Material A Material B [2]


4,275 9,375


10,350 [2]


(1,200) 10,050 2


20,100 [2]


13,650 [2]


975


(1,300) 13,325 5


[2] 66,625


Why add Closing Stock and subtract Opening Stock in the Raw Materials Purchases Budget? Ask yourself: Did you buy that raw material this year?


This is in €.


Direct Labour Unit production × Labour Hours × Labour Rate Jaipur 1,425 × 3 × 6 Agra 1,875 × 4 × 6


(c) Direct Materials


Opening Stock Material A (1,200 x 6) Opening Stock Material B (1,300 x 7)


Purchase of Raw Materials (20,100 + 66,625)


less Closing Stock of Material A (900 x 2) less Closing Stock of Material B (975 x 5) Cost of Raw Materials used


Direct costs Direct Labour Prime Cost


Factory Overheads Variable Overheads Fixed Overheads


Cost of Manufacture [4] 23,550


[2] 176,625 200,175 [2] 367,175


249


(1,800) (4,875)


Budgeted Manufacturing Account €


7,200 9,100


[4] [2]


€ 16,300


86,725 103,025


[4]


(6,675) 96,350


[4] 70,650 167,000


Variable Overheads Variable Overhead is given as per Skilled Labour Hour. Unit Production × Skilled Labour Hour × Variable Rate Jaipur 1,425 × 3 × 2 = 8,550 Agra 1,875 × 4 × 2 = 15,000 23,550


Do the sales budget to find the budgeted sales revenue. This is needed for the sales figure in the Trading Profit and Loss Account.


16


TIP


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