AKB: 19.

9 (Page: 859) Production budget

Century India Ltd. Is manufacturing three products A, C and E in two production departments F and G. The following details i
Products (in thousands of rupees)
A
Closing balance of finished stock anticipated on 31/03/2002 720
Closing balance of finished stock anticipated on 31/03/2003 600
[Note: stock is valued at standard cost]
Standard cost per unit
Standard cost (in Rs.) 24
Standard profit as a percentage of selling price 20%
Standard profit as a percentage of cost price 25.00%
Selling price 30.00
Normal loss in processing (% of input) 10.00%
Input 3,600,000

Budgetted sales: Total (in thousands of rupees)

southern region 5800 1200
Western region 5100 1500
Northern region 3200 800
Eastern region 3180 700
17280 4200

Standard labour time per unit and wage rate per hour Rate / hr. Standard time per unit
Department E 10 0.25
Department G 20 0.25

You are required to prepare:

(a) The production budget for 2002-03
(b) The direct labour budget for 2002-03, product-wise and department-wise
 Direct labour budget

s F and G. The following details in respect of these products are given below:
Products (in thousands of rupees)
C E
540 1800 540
570 1000 Sales 100 100
Profit 20 25
Standard cost per unit Cost 80 75
15 20 Profit on cost 0.25 0.3333333
25% 16.67%
33.33% 20.00%
20.00 24.00
20.00% 5.00%

(in thousands of rupees) Cost 100 100

1000 3600 Profit 20 25
1200 2400 Sales 120 125
400 2000 Profit as a % sales 16.67% 20.00%
400 2080 Profit % at cost 20
3000 10080

Standard time per unit

0.2 0.2
0.2 0.25
 100
16.67
83.33
0.200048

100
16.67
116.67
14.29%
AKB: 19.10 (Page: 860) Direct materials budget Direct labour budget

P Limited manufactures two products using one type of material and one grade of labour. Shown below is an extract from the c
Product AProduct B
Budgetted sales (Units) 3600 4800
Budgeted material consumption per unit (kg) 5 5
Budgeted material cost per kg 12 12
Standard hours allowed per product (hrs.) 5 5
Budgeted wage rate per hour (Rs.) 8 8

Overtime premium is 50% and is payable if a worker works for more than 40 hours a week. There are 90 direct workers.
The target productivity ratio (or efficiency ratio) for the productive hours worked by the direct workers in actually manufacturin
There are twelve 5-day weeks in the budget period and it is anticipated that sales and production will occur evenly through out
It is anticipated that stock at the beginning of the period will be: Product A: 1,020 units; Product B: 2,400 units; Raw material 4
The target closing stock, expressed in terms of anticipated activity during the budget period are: Product A 15 days sales, Produ

Required:
Calculate the material purchase budget and the wages budget for the direct workers, showing the quantities and values for the n
 below is an extract from the company's working papers for the next period's budget:

e are 90 direct workers.

rkers in actually manufacturing the products is 80%. In addition, the non-productive downtime is budgeted at 20% of the productive hours
will occur evenly through out the whole period.
B: 2,400 units; Raw material 4,300 kg.
roduct A 15 days sales, Product B 20 days sales; Raw material 10 days consumption.

quantities and values for the next period.

at 20% of the productive hours worked.
Example 11.1 (Master budget ) Page: 21; Chapter 11

Fact pattern
KK& Co. manufactures two products – Alpha and Beta. Alpha is produced in Department 1 and Beta is produced in
Standard material and labour cost
Material A $ 8.00 per unit
Material B $ 20.00 per unit
Direct labour hour $ 12.00 per hour
Overhead is recovered on a direct labour hour basis.
The standard material and labour usage of each product is as follows:
Model Alpha Model Beta
Material A 10 units 8 units
Material B 6 units 10 units
Direct labour hour 10 hours 15 hours

The balance sheet as of the end of the previous year was as follows:
Amount $ Amount $
ASSET
Property, Plant and Equipment
Land 200,000
Buildings and equipment 1,500,000
Accumulated depreciation -300,000 1,200,000
Current assets
Inventories -finished goods 100,000
Inventories – raw materials 200,000
Trade receivables 300,000
Cash 40,000
Total Assets
LIABILITIES AND EQUITY
EQUITY
Equity share capital 100,000 shares of $1 each 100,000
Other equity 14,40,000
Total equity
LIABILITIES
Current Liabilities
Trade creditors
Total liabilities and equity

Other relevant data for the budget period is as follows:

Finished goods
Model Alpha Model Beta
Forecast sales (units) 8,500 1,500
Selling price $450 $600
Ending inventory required (units) 1850 90
Beginning inventory (units) 170 80

Inventory of raw materials

Material A Material B
Ending inventory required (units) 20,000 1,350
Beginning inventory (units) 18,000 3,000

Budgeted overheads
Department 1 Department 2
($) ($)
Budgeted variable overhead rates
(per direct labour hour)
Indirect materials 1.2 0.8
Indirect labour 1.2 1.2
Power (variable component) 0.7 0.5
Maintenance (variable component) 0.2 0.4
Budgeted fixed overheads
Depreciation 100,000 50,000
Supervision 80,000 40,000
Power (fixed component) 40,000 10,000
Maintenance (fixed component) 50,000 5,000

Estimated non-manufacturing overheads (Selling and Administration)

Stationery and other expenses (Administ $5,000
Salaries (sales) 25,000
Salaries (Office) 30,000
Sales commissions 50,000
Car expenses (sales) 25,000
Advertising 60,000
Miscellaneous expenses (office) 10,000
205,000

Budgeted cash flows are as follows:

Quarter 1 Quarter 2
($) ($)
Receipt from customers 1,100,000 1,200,000
Payments:
Materials 400,000 500,000
Payments for wages 390,000 390,000
Other costs and expenses 150,000 100,000

Required
You are required to prepare a master budget and the following budgets:
(a) Sales budget
(b) Production budget
(c) Direct materials usage budget
(d) Direct materials purchase budget
(e) Direct labour budget
(f) Factory overheads budget
(g) Selling and administration budget
(h)Departmental operating budget for Department 1
(i) Master budget
(j) Cash budget
n Department 1 and Beta is produced in Department 2. The following information is available for the next budget period (financ

Amount $

1,400,000

640,000
2,040,000

1,540,000

500,000
20,40,000
Quarter 3 Quarter 4
1,150,000 1,000,000

450,000 540,000
390,000 400,000
75,000 20,000
e next budget period (financial year).