Question one

1. It is important for any budgeting exercise to provide tangible results that are acceptable, as a student of Advanced Management Accounting, list essentials or pre-requisites for successful budgeting.
2. The following information has been made available from the records of Mutundagye Enterprises for the next six months of 2010.

	Jan	Feb	March	April	May	June
Budgeted sales units	4,000	4,200	4,500	5,000	4,800	4,700
Closing stock units	1,000	1,500	1,300	800	1,200	1,400

Mutundagye anticipated selling each unit at UGX. 2,000 every month. The company had opening stock of finished goods amounting to 500 units. Mutundagye planned to reserve closing stock of finished goods at the end of the month; which will be part of the produced units. Information obtained from the production manager indicates that each unit will require the following composition of costs to be complete.

Cost element	Unit cost in shillings
Raw materials, 5 litres at UGX. 2,000 each	10,000
Labour costs, 10 hours at UGX. 500 each	5,00+0
Variable overhead costs 20% of labour costs	1,000
Total	16,000

The stores manager states that the companys policy is to reserve raw materials equivalent to 5% of the next months requirements because the suppliers are unreliable. Closing inventory of raw materials in June will be the same figure as in May.

The raw materials are purchased from the suppliers at UGX. 1,500 per litre.

Required: Prepare the following functional budgets.

1. Production budget
2. Sales budget
3. Raw materials utilization/cost budget
4. Labour cost budget