3. Scenario/Introduction/Background Information: 1909 Drink Sdn Bhd is a newly established company which produces bottled soya bean drink. The company was incorporated on 1" January 2021 and currently operates from its permanent premise located in Bandar Saujana Putra. The authorized share capital of 1909 Drink Sdn Bhd is RM300,000 of ordinary shares at RM1 each. Mr. Mubarak and his son, Mr. Umar are the directors of the company. Each of them invested RM100,000 in the form of cash to start the business. Using an old family recipe, Mr. Mubarak started venturing into the business of producing soya bean drink "SOY JOY" primarily for Shah Alam markets. Providing with Halal certification, and stringent hygiene and quality control, coupled with advanced packaging technology and designs, its charm and appeal are wide ranging and testily suited for all the muslim and non-muslim, There are five processes involved in producing "SOY JOY": 2. Soaking the soya bean. (Soya beans are clean and soak in the water for 10 -15 minutes) 1. Heating the soya bean. (Soya bean are heated in the microwave) 3. Boiling the soy milk. (Heat the soy milk to boiling point and cooled down to room 4. Grinding the soya bean. (Soya bean are heated in the microwave) temperature) 5. Packing the soy milk. (The soy milk is then poured into bottles, labelled and packed into boxes) In order to prepare a realistic budget, Mr. Liew Yuan Bing, who has an accounting background from Mahsa University gathered the following information: Cost of each material used in the Soy Best: No. Material used Cost (RM) Sugar Soya Beans 2.50/kg 4.50/kg 3 Water 0.20/liter Bottle 0.20/bottle The following are required to produce I litre of "SOY JOY". 125 grams of soy beans 1.5 litre of water 200 grams of sugar Direct labour usage is based on each quarter planned production. Since SOY JOY is a new established company, Mr. Mubarak only employed 10 direct labour workers. Each bottle of SOY JOY required 0.05 hour of direct labor hours. The rate paid to the workers is RM8/hour. Mr. Liew Yuan Bing estimated the sales of SOY JOY for the year 2021 is 100,000 bottles. The expected sales for each quarter are as follows: Quarter Bottles 2021: QI 15.000 Q2 20,000 Q3 30,000 Q4 35,000 2022: QI Q2 45,000 50,000 The company collects 85% of its billings during the same quarter in which sale is made and another 15% in the following quarter. The closing inventory for the first quarter is 1,000 bottles. The ending inventory for the following quarters need to be 10%, 12% and 16% from the next quarter's expected sales. It is also expected that ending inventory for 2022 is maintained at 12% per quarter. One bottle of SOY JOY is sells for RM2.50 (500ml). It is the policy of the company to purchase sugar and soy bean on quarterly basis to ensure there is no obsolesces of stocks. However, to ensure the business operation run smoothly, the closing stock of the sugar and soy beans are maintained at 60% of the next production requirements. All the material used (sugar and soy beans) are purchased from Oppa Mart Sdn Bhd. The payments were for 70% on cash basis and the remaining 30% will be paid on the following quarter. Meanwhile the company will buy bottle based on their production unit. Other costs are paid in the month incurred. The following are the budgeted costs for the year 2021. RM Factory electricity (Machinery) 600 per month Indirect Labour 1,600 per month EPF 697 per month Rental 700 per month Petrol 800 per month Utility expenses 1,000 per month Maintenance for delivery van 150 per month Insurance for delivery van 1,400 Repair of the grinding machine 500 Halal Certificate 400 Stationery expenses 200 Administrative overheads 7,000 Selling overheads 4,300 Overhead cost being absorbed to the cost unit based on the total machine hours of 15,000 machine hours. Assuming that one bottle of SOY JOY will need 0.10 machine hour. 75% of utilities, 70% of EPF expenses and 80% of rental are factory expenses. The Expansion Plan. In order to expand the business in future, the company is considering an investment in a new machine in order to cater the expected increase in sales by 35% for year 2022. The new machine would cost RM150,000 and would not be expected to have any resale value at the end of its life. As the machine is imported from Korea, the company is expected to incurred the transportation cost of RM5,800, RM5,500 for the insurance against damage during delivery and the installation charges of RM20,000. Although the machine may have a longer useful economic life, 1909 Drink Sdn Bhd uses a five year planning period for all investment projects. 1909 Drink Sdn Bhd will depreciate the machinery using straight line basis over its planning period. A market research costing RM7,500 was incurred by the company to identify potential sales. The result of the research suggests two possible stratergies that can be implemented by the company. Strategy 1 Strategy 2 RM 7 Selling price per unit Increase in sales volume for each year RM 8 14,350 units 16,000 units The variable cost per unit RM 3 RM2.50 The company pays tax at annual rate of 25%. The cost of capital is 10% and desired payback period is 3 years. 4. Tasks: Strategic Management Accounting Prepare the following budget on quarterly basis for the year ended 31 December 2021. (e) Prepare the sales budget (in Unit and RM) (f) Identify the Prime Cost budget (in Unit and RM) (g) Prepare the production cost budget (in Unit and RM) (h) Indicate the budgeted production cost per unit for SOY JOY