FOR WHOM: SWUN CONVERSION STUDENTS
QUESTION
QUESTION
Motungbede Engineering manufactures three products
for the building industry. The budgeted sales of products known as P, W and X
for the budgeted periods 1 are:
Product
|
Quantity
|
Price
|
P
|
4,000
|
N60
|
W
|
8,000
|
N70
|
X
|
6,000
|
N80
|
Materials used in the manufacture of the company`s
products are:
Component Ref. No.
|
1922
|
2244
|
3366
|
4488
|
Component Unit Cost
|
N2.00
|
N3.00
|
N4.00
|
N5.00
|
Quantities Used:
P
W
X
|
5
4
3
|
3
4
2
|
1
2
1
|
2
3
5
|
Two types of labour are used, viz Assemblers and
wires, the standard unit times for each product being:
Labours
|
Assemblies
|
Wires
|
Hourly Rate
|
50k
|
60k
|
P
|
3 hours
|
1.5 hours
|
W
|
4 hours
|
2 hours
|
X
|
5 hours
|
2.5 hours
|
Production overhead which is absorbed into product
costs on a direct labour hour basis is budgeted as follows:
N
Building Occupancy 30,050
Equivalent Utilisation 16,100
Personnel Services 12,150
Materials Handling 9,310
Production Planning and Control
9,790
Selling and distribution costs budgeted for the
period are:
N
Representation 101,300
Sales Office 30,100
Advertising and Publicity
29,100
and are charged to products in proportion to sales
income of the period.
Stocks at the beginning of period 1 are expected to
be:
Finished Goods
|
Quantity
|
Unit Cost (N)
|
P
W
X
|
1,000
3,000
2,000
|
39
51
51
|
Components:
1922
2244
3366
4488
|
40,000
20,000
10,000
30,000
|
2
3
4
5
|
Closing stocks at the end of period 1 are expected
to be an increase of 10% and reduction of 20% on opening stocks of finished
goods and components parts respectively.
You are required to:
(a) Prepare budget for:
i. Sales
in quantity and value
ii. Production
quantities
iii. Material
usage quantities
iv. Material
Purchase quantity and value
v. Direct
labour utilisation and cost
(b) Prepare
statement showing the valuation of finished stocks at the end of period.
(c) Prepare budgeted profit for the period
showing the amount of profit contributed by each product.
SOLUTION
. (a.i) Motungbede
Engineering
Sales Budget
Product
|
Quantity
|
Selling
Price(N)
|
Sales
Volume(N)
|
P
|
4,000
|
60
|
240,000
|
W
|
8,000
|
70
|
560,000
|
X
|
6,000
|
80
|
480,000
|
1,280,000
|
(a.ii) Motungbede Engineering
Production Budget
Product
|
Sales
Budget
|
Stock
Increase
|
Production
|
P
|
4,000
|
100
|
4,100
|
W
|
8,000
|
300
|
8,300
|
X
|
6,000
|
200
|
6,200
|
18,600
|
(a.iii) Motungbede Engineering
Material Usage Budget Components
Product
|
1922
|
2244
|
3366
|
4488
|
P
|
20,500
|
12,300
|
4,100
|
8,200
|
W
|
33,200
|
33,200
|
16,600
|
24,900
|
X
|
18,600
|
12,400
|
6,200
|
31,000
|
72,300
|
57,900
|
26,900
|
64,100
|
(a.iv) Motungbede Engineering
Material Purchases Budget
Components
|
1922
|
2244
|
3366
|
4488
|
Total
|
Budgeted Usage
|
72,300
|
57,900
|
26,900
|
64,100
|
|
Stock decrease
|
(8,000)
|
(4,000)
|
(2,000)
|
(6,000)
|
|
64,300
|
53,900
|
24,900
|
58,100
|
||
Cost Price
|
N2
|
N3
|
N4
|
N5
|
|
Purchase
|
N128,600
|
N161,700
|
N99,600
|
N290,500
|
N680,400
|
(a.v) Motungbede
Engineering
Direct Labour Utilisation and Cost
Budget
Product
|
Production
Budget
|
Assemblers
|
Wires
|
Total
|
P
|
4,100
|
12,300
|
6,150
|
|
W
|
8,300
|
33,200
|
16,600
|
|
X
|
6,200
|
31,000
|
15,500
|
|
76,500
|
38,250
|
|||
Budgeted Labour Rate Per Hour
|
50k
|
60k
|
||
Total Direct Labour Cost
|
N38,250
|
N22,950
|
N61,200
|
(b) Motungbede Engineering
Finished Stock Valuation
Product
|
Quantity
|
Unit
Cost
|
Stock
Value (N)
|
P
|
1,100
|
39
|
42,900
|
W
|
3,300
|
51
|
168,300
|
X
|
2,200
|
51
|
112,200
|
323,400
|
|||
(c) Motungbede
Engineering
Budgeted Profit Statement
P
|
W
|
X
|
Total
|
|
Sales Units
|
4,000
|
8,000
|
6,000
|
|
Selling Price Per Unit
|
N60
|
N70
|
N80
|
|
N
|
N
|
N
|
N
|
|
Sales Revenue
|
240,000
|
560,000
|
480,000
|
1,280,00
|
Production Costs:
Material
Labour
Production Overhead
Selling and Distribution
|
128,600
9,840
12,445
30,090
|
161,700
26,560
33,590
70,220
|
99,600
24,800
31,565
60,190
|
389,900
61,200
77,400
160,500
|
59,025
|
267,930
|
264,045
|
591,000
|
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