Correction (last bullet point): The company uses direct labour hours to allocate manufacturing overhead to production costs. The budgeted variable manufacturing overhead is RM2 per direct labour hour. The installation of new automated production equipment will increase total fixed manufacturing overhead cost to RM40,000 per month, of which RM5,000 is depreciation.

c. Compute the unit product cost of the letter board. (3 marks) d. One of the limitations of participative budgeting is budgetary slack. Explain why managers are encouraged to introduce "slack" into their budgets and provide ONE way a company can reduce the problem of budgetary slack. (3 marks) [TOTAL: 25 MARKS CIVI TE2OTYZNTQ3/a/ ME Instruction answer ALL questions Question 2 Amin Arts produces and sells affordable artistic letter boards. The company's financial controller is compiling the budget data for the first quarter of 2021. The following information will be used in preparing the company's operating budgets: Monthly budgeted sales for the first six months of 2021: Month January February March April May June Units 8,800 9.500 10.000 7.500 8,500 9,200 o Each letter board sells for RM25. The company ends each month with enough finished goods inventory to cover 20% of the next month's sales. Ending finished goods inventory as of 31 December 2020 are 1.760 units. . A new automated production equipment will be installed on January 1, and this will reduce the direct labour per letter board from 0.75 hour to 0.5 hour. The company pays its production labours RMIO per direct labour hour Each letter board requires 0.05 cubic meters of pine planks, Pine plantes cost RM120 per cubic meter. The company ends each month with enough wood to cover 10% of the next month's production needs. A total of 44 cubic meters of pine planks are on hand as of 31 December 2020 The company uses direct labour hours to allocate manufacturing overhead to production installation of new automated production equipment will increase total fixed manufacturing overhead cost to RM40.000 per month of which RM5,000 is depreciation