Sky has set up a jam-making business and is calculating the raw material requirements for the year ahead. Her sales estimates and raw materials usage assumptions are as follows: TABLE 1: Jam sales budget in units (jars) Gooseberry 245,000 Rhubarb 60,000 5,500 Sales units (jars) Opening inventory (jars) 30,000 TABLE 2: Jam raw material usage assumptions Fruit per jar Sugar per jar Gooseberry 0.7kg 0.6kg Rhubarb 1.1kg 1.0kg Calculate: (i) The production budget (in quantities) using the opening inventory assumptions in Table 1 above and assuming that closing inventory should be 10% of sales units. (ii) The materials budget (in quantities), identifying how much of each type of raw material is required. (iii) The total raw material purchase budget (in value £ and to the nearest whole £) if gooseberries cost £1.60 per kg; and rhubarb cost £2.25 per kg. Sugar costs £0.21 per kg, jars cost £0.15 each, lids cost £0.02 each and labels (one per jar) cost £0.01 each.
Sky has set up a jam-making business and is calculating the raw material requirements for the year ahead. Her sales estimates and raw materials usage assumptions are as follows: TABLE 1: Jam sales budget in units (jars) Gooseberry 245,000 Rhubarb 60,000 5,500 Sales units (jars) Opening inventory (jars) 30,000 TABLE 2: Jam raw material usage assumptions Fruit per jar Sugar per jar Gooseberry 0.7kg 0.6kg Rhubarb 1.1kg 1.0kg Calculate: (i) The production budget (in quantities) using the opening inventory assumptions in Table 1 above and assuming that closing inventory should be 10% of sales units. (ii) The materials budget (in quantities), identifying how much of each type of raw material is required. (iii) The total raw material purchase budget (in value £ and to the nearest whole £) if gooseberries cost £1.60 per kg; and rhubarb cost £2.25 per kg. Sugar costs £0.21 per kg, jars cost £0.15 each, lids cost £0.02 each and labels (one per jar) cost £0.01 each.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Sky has set up a jam-making business and is calculating the raw material requirements for the year
ahead. Her sales estimates and raw materials usage assumptions are as follows:
TABLE 1: Jam sales budget in units (jars)
Gooseberry
245,000
Rhubarb
Sales units (jars)
Opening inventory (jars)
60,000
5,500
30,000
TABLE 2: Jam raw material usage assumptions
Gooseberry
0.7kg
0.6kg
Rhubarb
Fruit per jar
Sugar per jar
1.1kg
1.0kg
Calculate:
(i) The production budget (in quantities) using the opening inventory assumptions in Table 1 above
and assuming that closing inventory should be 10% of sales units.
(ii) The materials budget (in quantities), identifying how much of each type of raw material is
required.
(iii) The total raw material purchase budget (in value £ and to the nearest whole £) if gooseberries
cost £1.60 per kg; and rhubarb cost £2.25 per kg. Sugar costs £0.21 per kg, jars cost £0.15 each, lids
cost £0.02 each and labels (one per jar) cost £0.01 each.
(iv) The total cost per jar for each type of jam.
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The production budget refers to the budget where the quantity to be produced in the particular future period is estimated by the entity.
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