Question
Famous Company Ltd. plans for the 6 months ended June 30, 2021 as follows: An issue of 5,000 shares at GHS3 will be in May.
Famous Company Ltd. plans for the 6 months ended June 30, 2021 as follows:
- An issue of 5,000 shares at GHS3 will be in May.
- Cost of plant GHS9,000 will be bought and paid for in April.
- Creditors for raw materials bought are paid two months after purchase.
- Depreciation for the 6 months are: Plant GHS1,800; Automobiles GHS1,200.
- Fixed overhead is at GHS900 per month, payable one month in arrears.
- Normally, debtors pay their accounts three months after they have bought the goods.
- Production of 80 units per month, apart from January, when only 50 units will be produced.
- Variable overhead and Direct labour are paid in the same month as the units are produced.
- Sales are expected at a price of GHS90 per unit as follows:
| Jan | Feb | Mar | Apr | May | Jun |
Units | 60 | 70 | 80 | 110 | 110 | 90 |
- Direct material purchases will be as follows:
| Jan | Feb | Mar | Apr | May | Jun |
GHS | 900 | 1,200 | 1,500 | 1,800 | 2,400 | 1,920 |
- Unit production costs: GHS
Direct material 30
Direct labour 36
Variable overhead 15 81
- The following statement of financial position has also been provided:
FAMOUS COMPANY LTD.
STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2020
| Cost | Depre- ciation | Net |
NON-CURRENT ASSETS | GHS | GHS | GHS |
Plant | 18,000 | 6,000 | 12,000 |
Automobiles | 12,000 | 2,400 | 9,600 |
| 13,000 | 8,400 | 21,600 |
CURRENT ASSETS |
|
|
|
Inventories: Raw materials Finished goods (175 units) Debtors (Oct. GHS4,590) (Nov. GHS1,620) (Dec. GHS1,350) Cash at Bank | 4,500 14,175
7,560 5,400 |
31,635 |
|
|
|
|
|
Less CURRENT LIABILITIES |
|
|
|
Trade creditors (Nov. GHS900; Dec. GHS720) | 1,620 |
|
|
Expense creditors (Dec) | 900 | (2,520) | 29,115 |
NET ASSETS EMPLOYED |
|
| 50,715 |
|
|
|
|
FINANCED BY: |
|
|
|
Share capital (10,000 shares at GHS3) |
|
| 30,000 |
Profit and Loss Account |
|
| 20,715 |
|
|
| 50,715 |
Required:
Compile the following budgets by months:
- Materials Budget
- Production Budget
- Production Cost Budget
- Trade Creditors Budget
- Trade Debtors Budget
- Cash Budget
- Forecast Income Statement for the six months ended June 30, 2021
- Projected Statement of Financial Position as at June 30, 2021
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started