Budgets for Planning and Control - Part 2

BUDGETS FOR PLANNING AND CONTROL

Let’s look at the simple example....again...

Sales of Product STU       1,000 units

Selling price/unit             RM150

Opening inventory for Product STU 200 units
Opening inventory for Material AA  2,500 units
Opening inventory for Material BB  800 units

Direct material for making product STU

 - Material AA        5 units@RM2.50 unit

 - Material BB        2 units@RM1.50 unit

Direct labour         3 hours@RM5.00 per hour

Overheads            RM1.50 per direct labour hour

Cash available at the beginning RM80,000

Prepare;

1.   Sales budget

2.   Direct material budgets

3.   Direct labour budgets

4.   Overhead budgets

and....again...

Sales of Product STU       1,000 units

Selling price/unit             RM150

Opening inventory for Product STU 200 units
Opening inventory for Material AA  2,500 units
Opening inventory for Material BB  800 units

Direct material for making product STU

 - Material AA        5 units@RM2.50 unit

 - Material BB        2 units@RM1.50 unit

Direct labour         3 hours@RM5.00 per hour

Overheads            RM1.50 per direct labour hour

Cash available at the beginning RM80,000

Notes: The management had decided to create a closing inventory for both finished goods and the direct materials. The finished goods to be set at 25% from the total sales unit and the direct material is to increase by 100 units for both codes.

Prepare;

1.   Sales budget

2.   Direct material budgets

3.   Direct labour budgets

4.   Overhead budgets