Question 15

ABC Ltd produces a single product with a single grade of labour. It sales budget and finished goods inventory budget for period 3 are as follows:

Sales 700 units

Opening stock of finished goods 50 units

Closing stock of finished goods 70 units

The goods are inspected only when production work is completed, and it is budgeted that 105 of finished work will be scrapped.

The standard direct labour hour required in producing the product is 3 hours. Labour is paid at GHS5 per hour whereas overtime is paid at a time and half. The budgeted productivity ratio for direct labour is 80%. The company employs 18 direct operatives, who are expected to average 144 working hours each in period 3.

Required

Prepare the production and the direct labour budget for period 3