company produces budgeted to Produce 6,000 units of Product PS and 1,000 units of Product TG in the coming year. ‘The data about the materials required to produce Products PS and TG is given as follows. Ps TS er unit per unit 12 12 6 8‘Solution: a Material Y kg For production of PS (W1) 36,000 )]_,_ For production of TG (W2) 4 (Ean 142,000 8 Material oe ee budget Va 000 44,000 ZL = Upeliginniey 6.000) (6,000) + Closing inventory 6.000 1,000 ‘Material purchases budget (units) 85,000 40,000 Material purchases budget s X $0.72 per kg « 85,000 61,200 Y $1.56 per kg « 40,000 62,400 Workings (W11) Budgeted production of Product PS = 6,000 units Therefore: 6,000 x 12 kg per unit = 72,000 kg of Material X required. Therefore: 6,000 x 6 kg per unit = 36,000 kg of Material Y required. (W2) Budgeted production of Product TG = 1,000 units ‘Therefore: 1,000 * 12 kg per unit = 12,000 kg of Material X ‘Therefore: 1,000 x 8 kg per unit = 8,000 kg of Material Y requiredRal [ee ce Accompany produces Products PS and TG and has budgeted to produce 6,000 units of Product PS and 1,000 units of Product TG in the coming year. The data about the labour hours required to produce Products PS and TG is given as follows. Finished products: PS per unit TG per unit Direct labour hour 8 12 ‘Standard rate for direct tabour = $5.20 per hourRequired: Prepare the(abour budgelYor the coming year Solution: Hours For Product PS 6,000 x 8 hrs 3,000 For Product TG 1,000 = 12 hrs {i200 Wd 000 @ $5.20 _ 312,000 Za‘A company produces Products PS and TG and has budgeted to produce 6,000 units of Product PS and 1,000 units of Product TG in the coming year. ‘The following data about the machine hours required to produce Products PS and TG ang the standard production overheads per machine hour is relevant to the coming year. PS per unit 1G per unit Machine hour 8 12 Production overheads per machine hour Variable $1.54 per machine hour Fixed $0.54 per machine hour Required: Catt Sven Dogo caming yar‘Solution: Overhead budget $s Variable costs 60,000 hours x $1.54 $2,400 Fixed costs 60,000 hours x $0.54 32,400 | + 124,800 Workings Machine hours — Product PS = 6,000 units x 8 hours = 48,000 machine hours: Machine hours — Product TG = 1,000 units x 12 hours = 12,000 machine hours Total machine hours = 48,000 + 12.000 = 60,000 397Test your understanding 1 ‘A company makes two products - A and B. The products are sold in the ratio 1:1. Planned selling prices are $100 and $200 per unit respectively. The company needs to earn $900,000 revenue in the coming year. Required: Prepare or the coming year.Test your understanding 1 Sales budget B Total Sales units (see working) 000 —= 3,000 + 6,000 Selling price per unit $100 $200 Sales value $300,000 nk 000 tss00, 000 ——I Working Total sales revenue = $900,000 $300 revenue is eamed every time a mix of one unit of Product A and one unit of Product B is sold ($100 + $200). 900, A Number of ‘mixes’ to be sold to eam $900,000 se = 3,000 ‘mixes’ 3,000 ‘mixes’ = 3,000 units of Product A and 3,000 units of Product B.(ete ener A company makes two products — PS and TG. Sales for next year are budgeted to be 5,000 units of PS and 1,000 units of TG. Planned selling prices are $95 and $130 per unit respectively. Required: Prepare thGales budget Yyr the next year. Solution: Sales — PS = 5,000 = $95 = $475,000 Sales — TG = 1,000 x $130 = $130,000Tilustration 3 — Production budgets ‘A company makes two praducts, PS and TG. Forecast sales for the ‘coming year are §,000 and 1,000 units repectively. ‘The company has the following opening and required closing inventory levals, PSunits TG units Ofening inventory 100 50 Required closing inventory 4,100 50 foroduction budget Required: Prepare th the coming year. CO [ae Production budget PSunits TG units Sales budget 5,000 4,000 + Closing inventory 4,400 50 Opening inventory (100) (60) Budgeted production in units 6,000 1,000QNo.2 Zephyr Co, manufactures three products. The expected production levels for each product are shown below: Product! Product2 Product 3 Budgeted production (units) 3,000 5,000 3,500 ‘Two types of labor are used in producing the three products. Standard times per unit and expected wage rates for the forthcoming year are shown below: Product! Product2 Product 3 Hours per unit (Skilled labor) Hours per unit (Semiskilled labor) 5 3 Production ovetheads per labor hour are as follows: ‘+ Variable overheads: $4.00 per labor hour. + Fixed overheads: $6,00 per labor hour. Required: Calculate pflcverncad budget. ys»BSC ME elma tlt eos al ¢ Product 1: 3,000 units x 2 hours/unit = 6,000 hours © Product 2: 5,000 units x 1 hour/unit = 5,000 hours ¢ Product 3: 3,500 units x 2 hours/unit = 7,000 hours Total skilled labor hours = 6,000 + 5,000 + 7,000 = 18,000 hours TTR elas elt ed * Product 1: 3,000 units x 5 hours/unit = 15,000 hours * Product 2: 5,000 units x 3 hours/unit = 15,000 hours * Product 3: 3,500 units x 4 hours/unit = 14,000 hours Total semi-skilled labor hours = 15,000 + 15,000 + 14,000 = 44,000 hoursaaa * Variable overhead rate = $4.00 per labor hour * Total labor hours (skilled + semi-skilled) = 18,000 + 44,000 = 62,000 Lele pe UR overheads = 62,000 hours Pa MOAT gd Fi Step 3: Calculate the fixed overhead costs. * Fixed overhead rate = $6.00 per labor hour bam overheads = 62,000 hours x $6.00/hour = 000 Ry Yee oor) LE Ome * Total overheads (variable + fixed) = i variable) + $372,000 (fixed) = $620,000 SEE eae EE ere Ee este Eee eeecr Newion Lid manufactures tree products. The expected production A levels foreach product are shown below. Product1 Product 2 Product 3 1 +), Budgeted production inunits 2700 4,100 2.800, “Twotypes of labour are usad in producing the three products. Standard times per unit and expecied wage rates forthe fothooming yaar are sou : Product Product? Padus Hes pr sites aur 2 4 8 ee i ‘Site bony tbe pit at in te 9 Sita eid sac tod labour 7 althe rate of Shou. Budgeting a Required: Complete ne fotowing. (ortho number cthous ofGated abadewicesis — [__] cca areninetes — to mer thos taba ores (—_——] ‘The cost ofthis labours $ ea(a) Skilled Labour: a * Total Hours: Product 1: 2, 700 x 3 = 8, 100 hours Product 2: 4,100 x 1 = 4, 100 hours Leacels (Vol HALO a Ue atc lH 8, 100 + 4, 100 + 8, 400 = 20, 600 hours * Cost: 20,600 x 9 = 185, 400 dollars (b) Semi-Skilled Labour: Es * Total Hours: Product 1: 2, 700 x 4 = 10, 800 hours Product 2: 4, 100 x 4 = 16, 400 hours Cresco eee IU aoc 10, 800 + 16,400 + 5, 600 = 32, 800 Lele ban eT oa 32, 800 x 6 = 196, 800 dollars