Question 1 The following sales forecast was developed by the sales team at Broadworld Manufacturing Company Ltd for the months indicated. The company produces two products Glow and Snow Sales Forecast 2018 Details Glow Snow July 1.500 units 2,000 units August 1,750 units 2,250 units September 2,000 units 1,900 units October 1,400 units 1,600 units November 1,700 units 1,500 units December 2,200 units 2,300 units Notes: To make one unit of Glow three (3) units of raw material F250 is used. One unit of F250 costs $40. Snow uses two (2) units of raw material K200 which costs $30 each. The company has decided that raw material stocks at the end of each month should be held equivalent to fifteen percent (15%) of the budgeted sales for the month in question. During the year, the company sold one unit of Glow for $110, while one unit of Snow was sold for $150. The decision was made that at the end of each month there should be in store sufficient finished goods stock to meet thirty percent (30%) of the sales for the next month. Required: Prepare the company’s sale budget for the period August to November 2018. Prepare the production budget for both products for the period August to November 2018. Prepare the direct raw materials usage budget for the period August to November 2018. Prepare the direct raw materials purchases budget for the period August to November 2018. Briefly explain, using two (2) examples what is meant by a “limiting budget factor”.

Budgeting: It is a process of planning the work to be performed. Under this process a formal plan is…

Answered: Question 1 The following sales forecast was developed by the sales team at Broadworld Manufacturing Company Ltd for the months indicated. The company…

FINANCIAL ACCOUNTING

10th Edition

ISBN: 9781259964947

Author: Libby

Publisher: MCG

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Question 1

The following sales forecast was developed by the sales team at Broadworld Manufacturing Company Ltd for the months indicated. The company produces two products Glow and Snow

Sales Forecast 2018

Details	Glow	Snow
July	1.500 units	2,000 units
August	1,750 units	2,250 units
September	2,000 units	1,900 units
October	1,400 units	1,600 units
November	1,700 units	1,500 units
December	2,200 units	2,300 units

Notes:

To make one unit of Glow three (3) units of raw material F250 is used. One unit of F250 costs $40. Snow uses two (2) units of raw material K200 which costs $30 each.
The company has decided that raw material stocks at the end of each month should be held equivalent to fifteen percent (15%) of the budgeted sales for the month in question.
During the year, the company sold one unit of Glow for $110, while one unit of Snow was sold for $150.
The decision was made that at the end of each month there should be in store sufficient finished goods stock to meet thirty percent (30%) of the sales for the next month.

Required:

Prepare the company’s sale budget for the period August to November 2018.
Prepare the production budget for both products for the period August to November 2018. Prepare the direct raw materials usage budget for the period August to November 2018.
Prepare the direct raw materials purchases budget for the period August to November 2018.
Briefly explain, using two (2) examples what is meant by a “limiting budget factor”.

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