Caltex Products plc manufactures electric mini-lawnmowers. Its sales and costs’ budget for November 20X2 is as follows:

Sales: 3 000 units × £72/unit

Costs:
Direct materials (metal):  3 000 units × (1kg per unit × £14/kg)

Direct materials (plastic): 3 000 units × (0.5kg per unit × £7/kg)

Direct labour: 3 000 units × (0.75 hours per unit × £8/hr) 

Production overhead:  £86 500

Other overheads: £31 000

The company does not absorb production overheads using an overhead absorption rate. 

• It may be assumed that all of its overheads are fixed in nature.
  The company’s actual results for the same month (November) are as follows: Sales: 2 950 units × £73/unit 

Costs:
Direct materials (metal): 2 950 units × (0.9kg per unit × £13.80/kg) 

 Direct materials (plastic): 2 950 units × (£0.5kg per unit × £7.20/unit)

Direct labour: 2 950 units × (0.7 hrs per unit × £8.20/hr)

Production overhead: £84 250

Other overheads: £32 250
Net profit: £34 658

Required:

i)  Produce a budget statement for Caltex for November. 

• ii)  Produce a profit statement for Caltex for November.

Answer rating: 100% (QA)

Step 1 A budget is a yearly statement of the projections for government revenues and expenses ... View the full answer