Gorse Limited manufactures one product. The budgeted sales for period 6 are for 10 000 units at a selling price of £100 per unit. Other details are as follows:

1 Two components are used in the manufacture of each unit:

Component Number Unit cost of each component

£

XY 5 1 WZ 3 0.50 2 Stocks at the beginning of the period are expected to be as follows:

(a) 4000 units of finished goods at a unit cost of £52.50.

(b) Component XY: 16000 units at a unit cost of £1.

Component WZ: 9600 units at a unit cost of £0.50.

3 Two grades of employees are used in the manufacture of each unit:

Employee Hours per unit Labour rate per hour

£

Production 4 5 Finishing 2 7 4 Factory overhead is absorbed into unit costs on the basis of direct labour hours.

The budgeted factory overhead for the period is estimated to be £96 000.

5 The administration, selling and distribution overhead for the period has been budgeted at £275 000.

6 The company plans a reduction of 50 per cent in the quantity of finished stock at the end of period 6, and an increase of 25 per cent in the quantity of each component.

Required:

Prepare the following budgets for period 6:

1 sales;

2 production quantity;

3 materials usage;

4 materials purchase;

5 direct labour;

6 the budgeted profit and loss account.