Budgeting

Preparation of functional budgets weeks. Each week consists of five days and each day comprises 7 hours. You are empleyed the the management accountant to XYZ Ltd and you originally prepared a budget for quarter Since the budget was prepared, three developments have taken place. 1. The company has begun to use linear regression and seasonal variations to forecast sales demand. Because of this, the estimated demand for quarter 3 has been revised to 2000 Alphas and 2400 Betas. 2. As a result of the revised sales forecasting, you have developed more precise estimates of sales and closing stock levels. The sales volume of both the Alpha and Beta in quarter 4 (the twelve weeks ending 10 December) will be 20% more than in the revised budget for quarter 3 as a result of seasonal variations. The closing stock of finished Alphas at the end of quarter 3 should represent 6 days sales for quarter 4 . The closing stock of finished Betas at the end of quarter 3 should represent 10 days sales for quarter 4 . Production in quarter 4 of both Alpha and Beta is planned to be 20% more than in the revised budget for quarter 3 . The closing stock of materials at the end of quarter 3 should be sufficient for 20 days production in quarter 4. 3. New equipment has been installed. The workforce is not familiar with the equipment. Because of this, for quarter 3 , they will be working at 80% of the efficiency assumed in the original budgetory data. Other data from your original budget which has not changed is reproduced below: 50 production employees work a 35 hour week and are each paid Rs. 2100 per week; overtime is paid for at Rs. 90 per hour; the cost of material is Rs. 100 per kilogram; opening stocks at the beginning of quarter 3 are as follows: i. finished Alphas 500 units ii. finished Betas 600 units iii. material 12000 kilograms there will not be any work in progress at any time. The production director of XYZ Ltd wants to schedule production for quarter 3 (the twelve weeks ending 17 September) and asks you to use the revised information to prepare the following: (a) the revised production budget for Alphas and Betas; (b) the material purchases budget in rupees; (c) a statement showing the cost of labour. (d) total of material \& labour