June July OXY Ltd plans to sell the following: Product A (units) 1200 1800 2800 3200...

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June July OXY Ltd plans to sell the following: Product A (units) 1200 1800 2800 3200 3200 August September October Stock of finished goods at 1 June was 240 units and the company's stockholding policy is for the finished goods stock at the end of each month to represent 20% of the following month's sales requirement. Each unit of product A uses two units of a component X1. On 1 June there were expected to be 264 units of XI in stock. The desired closing stock of X1 is 10% of the next month's production. Each unit of component X1 costs £5. Each unit of product A requires £6 of labour. Fixed administration overheads in each month are budgeted to be £5000 (and include a charge of £1000 depreciation). Product A can be sold for £26 each. Labour and fixed overheads are paid in the same month. Trade receivables (trade debtors) take two months to pay and the company pays its trade payables (trade creditors) after one month. The opening cash balance is £10,000. Required: (1) The production budget (in units) for June, July and August. (ii) The production cost budget for June, July and August. (iii) The raw material purchases budget (in units and £'s) for June, July and August. June July OXY Ltd plans to sell the following: Product A (units) 1200 1800 2800 3200 3200 August September October Stock of finished goods at 1 June was 240 units and the company's stockholding policy is for the finished goods stock at the end of each month to represent 20% of the following month's sales requirement. Each unit of product A uses two units of a component X1. On 1 June there were expected to be 264 units of XI in stock. The desired closing stock of X1 is 10% of the next month's production. Each unit of component X1 costs £5. Each unit of product A requires £6 of labour. Fixed administration overheads in each month are budgeted to be £5000 (and include a charge of £1000 depreciation). Product A can be sold for £26 each. Labour and fixed overheads are paid in the same month. Trade receivables (trade debtors) take two months to pay and the company pays its trade payables (trade creditors) after one month. The opening cash balance is £10,000. Required: (1) The production budget (in units) for June, July and August. (ii) The production cost budget for June, July and August. (iii) The raw material purchases budget (in units and £'s) for June, July and August.

Answer rating: 100% (QA)

SOLUTION To determine the production budget for June July and August we need to consider the desired closing stock of finished goods for each month The desired closing stock of finished goods for a pa... View the full answer