Truro manufactures a single product, Q. with a single grade of labour. Its sales budget and...

  

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Truro manufactures a single product, Q. with a single grade of labour. Its sales budget and finished goods inventory budget for period 3 are as follows. Sales Opening inventories, Closing inventories, 700 units finished goods 50 units finished goods 70 units The goods are inspected only when production work is completed, and it is budgeted that 10% of finished work will be scrapped. The standard direct labour hour content of product Q is three hours. The budgeted productivity ratio for direct labour is only 80% (which means that labour is only working at 80% efficiency). The company employs 18 direct operatives, who are expected to average 144 working hours each in period 3. Required: (a) Prepare a production budget. (b) Prepare a direct labour budget. (c) Comment on the problem that your direct labour budget reveals, and suggest how this problem might be overcome. Truro manufactures a single product, Q. with a single grade of labour. Its sales budget and finished goods inventory budget for period 3 are as follows. Sales Opening inventories, Closing inventories, 700 units finished goods 50 units finished goods 70 units The goods are inspected only when production work is completed, and it is budgeted that 10% of finished work will be scrapped. The standard direct labour hour content of product Q is three hours. The budgeted productivity ratio for direct labour is only 80% (which means that labour is only working at 80% efficiency). The company employs 18 direct operatives, who are expected to average 144 working hours each in period 3. Required: (a) Prepare a production budget. (b) Prepare a direct labour budget. (c) Comment on the problem that your direct labour budget reveals, and suggest how this problem might be overcome.

Answer rating: 100% (QA)

Solution a We are required to prepare a production budget for Truro Ltd For quarter ended ... View the full answer