Enterprise PIE PRINCE (“PP”) specialises in the manufacturing of two types of pies,namely a cheese & ham pie and a spinach & feta pie. The pies are so popular that
the enterprise is struggling to meet the demand.Two different suppliers respectively supply rolled-out puff pastry and pre-prepared fillings of cheese & ham and spinach & feta to PP. The pies are manufactured in two
different production processes.

In Department 1 the rolled-out pastry is cut according to the shape of the pie; thereafter the pastry is filled with one of the two fillings. The pie is then folded and
closed and sent to Department 2.

In Department 2 the pies are packaged and frozen. The pies are sold to wholesalers who are then solely responsible for the distribution thereof.

The financial director is concerned that sufficient planning does not exist. He therefore asked the management accountant to prepare an operating budget for the
coming financial year. The following information is provided to you:

1. Market research at a cost of R100 000 indicated that the sales for the financial year 2021 would be as follows:

Month                  Cheese & Ham            Spinach & Feta
July 2021                R80 000                              R72 000
August 2021           R88 000                            R80 000
September 2021   R76 000                            R68 000
October 2021        R80 000                             R80 000

2. The selling price for both pies is R8 per pie.

3. The standard usage per pie for the first six months of 2021 (January to June) was as follows:
                                                          Cheese & Ham                                   Spinach & Feta

Rolled out puff pastry                             30g                                                        30g

Filling                                                       150g                                                       150g

Packaging                                                30cm                                                      30cm

After the management accountant calculated the standard cost variances for the first six months of 2021, he decided to adjust the standard usage of the fillings. The standard quantity should be reduced by 10%.

4. 4. Work-in-process:
No work-in-process exists for cheese & ham or spinach & feta pies because ham and spinach are perishable goods. You can assume that 100% of the pastry and filling are added in Department 1 and 100% of the labour. Packaging material is added in Department 2. Management has taken a decision to allocate 100% of all overheads (variable and fixed) to Department 2.

5. Finished goods and raw material:

                                                                                   1 July 2021                                  30 September

Finished products : Cheese & Ham                       1 500 units                                  1 000 units

Finished products: Spinach & Feta                        1 000 units                                   1 000 units

Rolled put puff pastry                                              120 kg                                           150 kg

Packaging                                                                 1 500m                                          2 000m

PP has made a management decision to keep finished goods inventory of 10% of the following month’s sales requirements starting from the end of June 2021.

6. Purchasing prices of material:
The rolled-out puff pastry is purchased in large quantities and PP therefore qualifies for a quantity discount of 2% of the purchase price of R15.31 per 1 kg roll. The fillings are purchased at R20 per 1 kg filling.
The packaging consists of pre-printed rolls of special heat resistant paper at R4 per meter.

7. Other standard costs:
Direct labour: Each pie requires 0.05 hours of direct labour to manufacture at a cost of R15 per direct labour hour
Variable manufacturing overheads are based on direct machine hours at R20 per hour. It takes 0.025 machine-hours to package 1 pie.
Fixed manufacturing overheads amount to R180 000 per annum, which includes depreciation of R20 000 per annum. The fixed cost is based on a volume of 200 00 units per annum.

Required:
Prepare the following budgets for the quarter ending 30 September 2021 (in total, not by month):
2.1 Production budget (12 marks)
2.2 Raw material budget (12 marks)
2.3 Closing inventory budget (10 marks)
2.4 Cost of sales budget, only for product Cheese & Ham pies (8 marks)