Intermediate: Preparation of functional budgets ABC Limited manufactures three products from three basic raw materials in three
Question:
Intermediate: Preparation of functional budgets ABC Limited manufactures three products from three basic raw materials in three departments. The company operates a budgetary control system and values its stock of finished goods on a marginal cost basis. From the data given below. you are required to produce lor the month of June 1979 the following budgets:
(a) production:
(b) material usage;
(c) purchases ;
(d) profit and loss account for each product and in total.
Budgeted data, lor June 1979 .
The company is Introducing a new system of inventory control which should reduce stocks. The forecast is that stocks at 30 June 1979 will be reduced as follows : raw materials by 10% and finished products by 20%.
Fixed production overhead 1s absorbed on a direct labour hour basis. It IS expected that there will be no work-in-progress at the beginning or end of the month.
Administration cost 1s absorbed by products at a rate of 20% of production cost and selling and distribution cost is absorbed by products at a rate of 40% of production cost.
Profit IS budgeted as a percentage of total cost as follows:
product A 25%: product B 12WYo and product C 16%%.
Standard cost data, per unit of product
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