BIC manufactures two products, A and B, which use the same raw materials, Q and R. One unit of A uses 4 kilograms of Q and 2 meters of R. One unit of B uses 3 kilograms of Q and 1.5 meters of R. A kilogram of Q is expected to cost $5 and a meter of R $4.

Budgeted sales for 20X9 are 7,000 units of A and 5,000 units of B; finished goods inventories on January 1, 20X9 are 1,000 units of A and 500 units of B, and the company plans to hold inventories of 800 units of each product on December 31, 20X9.

Inventories of raw material are 5,000 kilograms of Q and 2,500 meters of R on Jan 1, 20X9, and the company plans to hold 5,500 kilograms and 2,000 meters respectively on December 31, 20X9.

The finished goods are inspected only when production work is completed, and it is budgeted that the productions of 12% of A and 8% of B will be scrapped.

The stores managers have suggested that the provisions of 400 kilograms of Q and 250 meters of R should be made for damages and deterioration of items held in stores.

Two types of labour are involved in the preparations of A and B, skilled and semi-skilled. The standard skilled labour costs $8 per hour and standard semi-skilled $4 per hour. Half as many standard skilled labour hours as 6 standard semi-skilled labour hours are needed to produce A, and twice as many standard skilled labour hours as 4 standard semi-skilled labour hours are needed to produce B. The budgeted productivity ratios for skilled labour and semi-skilled labour are only 90% and 80%, respectively (which mean that skilled labour and semi-skilled labour are respectively only working at 90% and 80% efficiency).

Prepare budgets according to the actual outputs achieved:

Production budget

Material usage budget

Material purchases budget (itemized and grand total)

Labour usage budget

Labour costs budget (itemized and grand total)