ECON4281S TMc Lecture 13 Budgg planning Cs stu :E It E plc manufactures and distributes components for the electronics industry. The rm's management and management accounting systems are built around budgetary planning and standard variable costing systems. The management team has agreed its operational budgets for the forthcoming budget year: 1. Sales will be: Quarter 1 E million 1 48 2 48 3 42 4 42 Note: In the previous year, sales were 48 million per quarter. 2. Selling prices will remain constant throughout the budget year. 3. Within each quarter, the sales mix will be : Product A: 50% of sales value Product B: 50% of sales value. 4. Selling prices will be: Product A: 20 per unit Product B: 50 per unit. 5. Variable production costs per unit will be: Product A Product B Direct material 10 20 Direct labour 2 5 Overhead 2 5 6. Finished goods inventories of 2 million will be maintained throughout the budget year for each product; nished goods inventories are valued at variable production cost. 7. Products A and B are manufactured from the same direct material; total direct material inventories will be maintained at 1 million throughout the budget year. 8. Direct material prices, direct labour wage rates and variable production overhead input prices will remain constant over the budget year. 9. Budgeted annual xed overhead costs (Emillion) are as follows (last year's actual costs are shown in brackets), Production, 10 (15); Administration, 10 (14); Selling and Marketing, 10 (15}; Depreciation, 5 (8); Training, 1 (5); Research, 4 (8); Maintenance, 1 (5}. Fixed overhead costs will be incurred evenly over the budget year. 10. Budgeted management bonuses, not included in 9. above, are 10 million, payable on the last day of the budget year; last year management bonuses were 7 million. 11. E plc makes all of its sales on credit and customers pay their accounts at the end of the month following the month of sale