Question 3: Budgeting (3.5)

Guru started the business of selling sports goods. The sales estimates for the four quarters of the year 2020 are as follows:

Year 2019	Units
Quarter 1	3,000
Quarter 2	4,000
Quarter 3	5,000
Quarter 4	7,000
Total	19,000

Required:

a. Prepare production budget for the first three quarters requires that the ending inventory of a quarter to amount to 10% of the sales units for the next quarter. (1.0)

b. The company uses 0.2 kg of direct materials for producing each unit that can be bought at a price of $7 per kilogramme. Prepare direct material purchase budget in units and in dollars for the first three quarters (1.5)

c. Evaluate how budgeting respond appropriately to solving financial problems to lead organisations to sustainable success (1.0)