ACW$271$ MANAGEMENT ACCOUNTING II

TOPIC $1$ TUTORIAL

Question $1$

Vision Limited manufactures and sells a single product. The following information is available for the period December Year $1$ to May Year $2.$

Sales:

The budgeted sales, in units, are as follows:

$\backslash$table$[[$December$,$January,February,March,April,May$],[480,520,540,560,560,540]]$

The standard selling price is RM$25$ per unit. $40\%$ of the sales are expected to be cash sales with the remaining customers allowed one month credit. It is estimated that $5\%$ of credit customers will be bad debts.

Production:

The company manufactures $75\%$ of the budgeted sales during the month before sales and the remaining $25\%$ in the month of sales.

Costs:

Direct materials will be RM$10$ per unit of finished product. Materials will be purchased in the month prior to their use in production, and paid for in the month following purchase.

Direct labour will be paid at a rate of RM$4$ per unit of finished product, payable in the month of production. A bonus payment of RM$2\mathrm{.}00$ per unit will be paid on all additional monthly production in excess of $500$ units, paid in the month following production.

Fixed production overheads of RM$20,000,$ including depreciation of RM$6,800,$ are budgeted for the year ahead. These are budgeted to be the same each month and, apart from depreciation, are payable in the month they are incurred.

Variable selling expenses are expected to be RM$1\mathrm{.}50$ per unit payable in the month of sale.

Fixed administration overheads of RM$6,000$ for the year ahead are budgeted to be the same per month and payable in the month they are incurred.

Cash:

The company expects to have a bank overdraft balance of RM$2,500$ at the start of January Year $2.$

Required:

Prepare the following budgets for each of months January to March Year $2$:

$($a$)$ Production

$($b$)$ Material purchases $($RM$)$

$($c$)$ Labour cost

$($d$)$ Cash

$1$