The Industrial Corporation produces two products, AK and BK. The following sales forecast for 2022 was decided
Question:
The Industrial Corporation produces two products, "AK" and "BK".
The following sales forecast for 2022 was decided on by the budget committee and presented to you, the management accountant.
Sales forecast
Details | AK/units | BK/units |
December 2021 | 5,800 | 3,500 |
January 2022 | 5,500 | 4,000 |
February 2022 | 6,400 | 4,800 |
March 2022 | 5,000 | 5,200 |
April 2022 | 4,900 | 5,400 |
May 2022 | 6,200 | 4,500 |
Notes:
(i) During 2022, the company sold one unit of "AK" for $1,200 while one unit of BK was
sold for $1,400.
(ii) To make one unit of "AK" four units of raw material zinc is used, while two units of
raw material aluminum is used to produce one unit of "BK".
(iii) Raw materials stock in units at the end of each month is to be held at a level equal to twenty percent (20%) of the forecasted sales for the next month.
(iv) It was decided by management that at the end of each month there should be enough finished goods stock on hand to meet twenty (20%) of the sales for the next month.
Required:
For the period, January 2022 to April 2022 do the following:
- The company's sales budget for both products (6 marks)
- The production budget for both products. (10 marks)
- Outline four (4) advantages that can be derived from proper budgeting practices within an organization. (4 marks)
Managerial Accounting
ISBN: 978-0078111006
14th edition
Authors: Ray Garrison, Eric Noreen and Peter Brewer