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    Examples FMA-8a

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    Annie manufactures chairs, desks, and stools and needs to prepare budgets for March. (I) The sales budget totals $71,490 with chairs at $34,800, desks at $24,960, and stools at $11,730. (II) The production budget requires 314 chairs, 120 desks, and 209 stools to meet the sales target and maintain a 30% closing inventory. (III) The materials and labor usage budgets include 2,274 cubic meters of wood, 1,197 cubic meters of plastic, 1,960 hours of unskilled labor costing $7,840, and 1,588 hours of skilled labor costing $9,528.

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    Examples FMA-8a

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    Annie manufactures chairs, desks, and stools and needs to prepare budgets for March. (I) The sales budget totals $71,490 with chairs at $34,800, desks at $24,960, and stools at $11,730. (II) The production budget requires 314 chairs, 120 desks, and 209 stools to meet the sales target and maintain a 30% closing inventory. (III) The materials and labor usage budgets include 2,274 cubic meters of wood, 1,197 cubic meters of plastic, 1,960 hours of unskilled labor costing $7,840, and 1,588 hours of skilled labor costing $9,528.

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    Fundamentals of accounting, NUST

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    Annie manufactures chairs, desks, and stools and needs to prepare budgets for March. (I) The sales budget totals $71,490 with chairs at $34,800, desks at $24,960, and stools at $11,730. (II) The production budget requires 314 chairs, 120 desks, and 209 stools to meet the sales target and maintain a 30% closing inventory. (III) The materials and labor usage budgets include 2,274 cubic meters of wood, 1,197 cubic meters of plastic, 1,960 hours of unskilled labor costing $7,840, and 1,588 hours of skilled labor costing $9,528.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    18 views3 pages

    Examples FMA-8a

    Uploaded by

    Daddy
    Annie manufactures chairs, desks, and stools and needs to prepare budgets for March. (I) The sales budget totals $71,490 with chairs at $34,800, desks at $24,960, and stools at $11,730. (II) The production budget requires 314 chairs, 120 desks, and 209 stools to meet the sales target and maintain a 30% closing inventory. (III) The materials and labor usage budgets include 2,274 cubic meters of wood, 1,197 cubic meters of plastic, 1,960 hours of unskilled labor costing $7,840, and 1,588 hours of skilled labor costing $9,528.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 3

    Question:

    Annie manufactures exclusive office equipment and is attempting to prepare a


    budget for March. The following information is relevant:

    Opening Budgeted sales in


    Selling price
    inventory in units units March
    Chairs 63 290 120
    Desks 36 120 208
    Stools 90 230 51

    Annie requires that her closing inventory be 30% of that month's sales. All three
    products are made using wood, plastic, unskilled labour, skilled labour and other
    overheads. The quantities are as follows:

    Unskilled Skilled labour


    Wood M3 Plastic M3
    labour hr hr
    Chairs 4 2 3 2
    Desks 5 3 5 8
    Stools 2 1 2 -
    Cost $12 $7 $4 $6

    Annie's opening inventory of raw materials is 142 cubic metres of wood and 81 cubic
    metres of plastic. She intends to increase this during March, however, so that she
    always has sufficient raw materials to produce 50 units of each item of equipment.

    Other overheads are recovered on the basis of $1 per labour hour.

    Required:

    a) Prepare functional budgets for March for:


    I. Sales budget in dollars
    II. Production budget in units
    III. Materials usage budget in units
    IV. Labour usage budget in dollars
    V. Materials quantity purchased and cost budget
    b) Prepare a budgeted profit and loss account down to gross profit for the
    month ending 31 March.

    1
    Solution:

    a) Functional budgets for March:

    (I) Sales budget

    Chairs Desks Stools Total ($)


    Quantity 290 120 230
    Price $120 $208 $51
    Value $34,800 $24,960 $11,730 $71,490

    (II) Production budget in units

    Chairs Desks Stools


    Sales 290 120 230
    Add: Closing inventory (30% of sales) 87 36 69
    377 156 299
    Less: Opening inventory (63) (36) (90)
    Production 314 120 209

    (III) Materials usage in units

    Wood M3 Plastic M3
    Chairs (314 x 4) 1,256 (314 x 2) 628
    Desks (120 x 5) 600 (120 x 3) 360
    Stools (209 x 2) 418 (209 x 1) 209
    2,274 1,197

    (IV) Labour usage

    Total hours Unskilled hours Skilled hours


    Chairs (314 x 3) 942 (314 x 2) 628
    Desks (120 x 5) 600 (314 x 8) 360
    Stools (209 x 2) 418 - -------
    1,960 1,588
    Cost per hour x $4 x $6
    Total Cost ($) $7,840 $9,528

    (V) Materials purchase quantity and cost ($)

    Wood M3 Plastic M3
    Usage 2,274 1,197
    Add: Closing inventory: 50 x (4+5+2) 550
    50 x (2+3+1) 300
    2,824 1,497
    Less: Opening inventory (142) (81)
    Quantity purchased 2,682 1,416

    2
    Cost per M3 x $12 x $7
    Total purchase $32,184 $9,912

    b) Budgeted profit and loss for the month ending 31st March:

    $ $
    Sales 71,490
    Less: Cost of Sales
    Wood (2,274 x $12) 27,288
    Plastic (1,197 x $7) 8,379
    Unskilled labour 7,840
    Skilled labour 9,528
    Overheads ($1 per labour hour) ($1,960+$1,588) 3,548
    56,583
    Add: Opening inventory of finished goods (W) 15,255
    Less: Closing inventory of finished goods (W) (16,578)
    (55,260)
    Gross profit 16,230

    Workings

    Chairs ($) Desks ($) Stools ($) Total ($)


    Wood (12 x 4) 48 (12 x 5) 60 (12 x 2) 24
    Plastic (7 x 2) 14 (7 x 3) 21 (7 x 1) 7
    Unskilled labour (4 x 3) 12 (4 x 5) 20 (4 x 2) 8
    Skilled labour (6 x 2) 12 (6 x 8) 48 -
    Overhead (1 x 5) 5 (1 x 13) 13 (1 x 2) 2
    Cost per unit 91 162 41
    Opening inventory units 63 36 90
    Opening inventory of finished goods 5,733 5,832 3,690 15,255
    Closing inventory units 87 36 69
    Closing inventory of finished goods 7,917 5,832 2,829 16,578

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