Company Coco is a luxury chocolate manufacturer, which has recently been performing well. The board of directors is considering how it should expand the business and is looking at a number of options. First, the directors need to produce a budget for the coming year and ensure that the business can maintain its profitability.

The marketing and production directors have given you, the management accountant, details of estimated product sales volumes and proposed sales prices, as well as expected raw material and factory costs. They plan to produce 20 chocolate bars in every direct labour hour.

The sales director is confident that he could increase sales prices with a small decrease in sales volume.

The marketing director would like to expand the product range by buying fruit and nut chocolate bars from a supplier but has asked you to estimate what it would cost the company to make them instead.

The managing director has ambitious

plans to buy a moulding machine to save labour and packaging labour costs. Table MA.1

	Volume chocolate bars	Selling price per bar £	Cocoa grams per bar	Sugar grams per bar	Milk millilitres per bar
Dark	80,000	2.00	170	30	0
Milk	140,000	1.80	130	40	30
White	60,000	2.00	0	70	130
Raw material costs			£4 per kg	£2 per kg	£1 per litre

Indirect costs*	£k
Rent	18.2
Utilities	13.8
Factory administration	12.7
Marketing and sales	47.4
Administrative salaries	38.5

Table MA.2

*Factory indirect costs are currently allocated on a blanket rate. Packaging is estimated at £200 per 1,000 bars.

Direct labour costs are expected to be £10 per hour.

REQUIRED:

Prepare a budget based on the information in Table MA.1 including total sales revenue, raw material and packaging purchases, and direct labour costs.