Selling price Materials cost GH¢20 per unit 3 kg per unit at GH¢2.5 per kg 0.6 hours per unit at GH¢4 GH¢1.2 per unit Labor cost Direct expenses Sales in May, June and July, 2021 are forecast to be 12,000 units in cach of the three months. As a direct result of marketing expenditure of GH¢8,000 in August 2021, sales are expected to be 11,000 units in August 2021, and to increase by 10% in cach month from September to December, 2021. Sales after December 2021 are expected to remain at the December 2021 level. From business history, the management of Comfort Ltd has determined the following to be the pattern by which sales revenues are received: Twenty-five percent (25%) of sales are received in the month during which the sales occur; 30% of sales are received in one month following the month of sale; 30% of sales are received in two months following the month of sale; and 12% of sales are received in the third month following the month of sale. The remaining percentage of sales revenue is expected to be uncollectible. Inventories of finished goods at the end of each month are planned to be 20% of the expected sales for the following month. Inventories of materials at the end of cach month are planned to be 50% of the material required for the following month's production. Inventory of finished goods at the close of June 2021 is expected to be 1,800 units, while inventory of raw materials at the close of June 2021 is expected to be 9,200 kg. Materials are paid for in the month following purchase. Labor and direct expenses are paid for in the month in which they occur. Overheads for production, administration and distribution is expected to be GHe 34,000 per month, which amount includes a depreciation charge of GH ¢12,000 per month. These overheads are payable in the months in which they occur. The firm pays interest twice per year, in March and September at GH¢6,000 in cach of the two months. The cash balance at the end of June 2021 is expected to be GH¢60,000. Required: Prepare, on a month-by-month basis for the six-month period from July to December 2021, the following budgets: Sales budget Production budget Raw materials budget i. i. ii.

Selling price Materials cost GH¢20 per unit 3 kg per unit at GH¢2.5 per kg 0.6 hours per unit at GH¢4 GH¢1.2 per unit Labor cost Direct expenses Sales in May, June and July, 2021 are forecast to be 12,000 units in cach of the three months. As a direct result of marketing expenditure of GH¢8,000 in August 2021, sales are expected to be 11,000 units in August 2021, and to increase by 10% in cach month from September to December, 2021. Sales after December 2021 are expected to remain at the December 2021 level. From business history, the management of Comfort Ltd has determined the following to be the pattern by which sales revenues are received: Twenty-five percent (25%) of sales are received in the month during which the sales occur; 30% of sales are received in one month following the month of sale; 30% of sales are received in two months following the month of sale; and 12% of sales are received in the third month following the month of sale. The remaining percentage of sales revenue is expected to be uncollectible. Inventories of finished goods at the end of each month are planned to be 20% of the expected sales for the following month. Inventories of materials at the end of cach month are planned to be 50% of the material required for the following month's production. Inventory of finished goods at the close of June 2021 is expected to be 1,800 units, while inventory of raw materials at the close of June 2021 is expected to be 9,200 kg. Materials are paid for in the month following purchase. Labor and direct expenses are paid for in the month in which they occur. Overheads for production, administration and distribution is expected to be GHe 34,000 per month, which amount includes a depreciation charge of GH ¢12,000 per month. These overheads are payable in the months in which they occur. The firm pays interest twice per year, in March and September at GH¢6,000 in cach of the two months. The cash balance at the end of June 2021 is expected to be GH¢60,000. Required: Prepare, on a month-by-month basis for the six-month period from July to December 2021, the following budgets: Sales budget Production budget Raw materials budget i. i. ii.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 4CE: Refer to Cornerstone Exercises 2.2 and 2.3. Next year, Pietro expects to produce 50,000 units and...

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