Question 1

Glory Berhad is preparing its annual budgets for the year to 31 December. It manufactures and sells one product which has a selling price of RM150. The marketing director believes that the price can be increased to RM160 with effect from 1 July and that at this price the sales volume for each quarter will be as follows:

	Sales Volume
Quarter 1	40,000
Quarter 2	50,000
Quarter 3	30,000
Quarter 4	45,000

Sales for each quarter of the following year are expected to be 40,000 units.

Each unit of the finished product which is manufactured requires four units of component A and three units of component B, together with a body shell C. These items are purchased from an outside supplier.

Currently prices are:

Component A	RM8.00 each
Component B	RM5.00 each
Shell C	RM30.00 each

The components are expected to increase in price by 10 per cent with effect from 1 April; no change is expected in the price of the shell.

Assembly of the shell and components into the finished product requires three labour hours: labour is currently paid at RM10.00 per hour. A 4 per cent increase in wage costs is anticipated to take effect from 1 October.

Variable overhead costs are expected to be RM10 per unit for the whole of the year; fixed production overhead costs are expected to be RM240,000 for the year, and are absorbed on a per unit basis.

Opening stocks (inventories) are expected to be as follows:

Finished units	9,000 units
Component A	3,000 units
Component B	5,500 units
Shell C	500 units

Closing stocks (inventories) at the end of each quarter are to be as follows:

Finished units	10% of next quarters sales
Component A	20% of next quarters production requirements
Component B	15% of next quarters production requirements
Shell C	10% of next quarters production requirements

Requirement:

1. Prepare the following budgets of Glory Berhad for the year ending 31 December, showing values for each quarter and the year in total:

1. sales budget (in RM and units)
2. production budget (in units)
3. material usage budget (in units)
4. production cost budget (in RM)