Question
Flying Eagles Ltd manufactures furniture items. For their popular product item, sofa, the sales budget for the next quarter from April to June 2023 has
Flying Eagles Ltd manufactures furniture items. For their popular product item, sofa, the sales budget for the next quarter from April to June 2023 has been completed as follows:
April May June Units 80 86 84 Selling price $1,200 $1,200 $1,200 Sales revenues $96,000 $103,200 $100,800
Additional information related to its costs and expenses are available below:
Direct material per unit $ 55
Direct labour per hour 20
Variable manufacturing overhead per hour 3.50
Fixed manufacturing overhead per month 3,000
Sales commissions per unit 20
Sales salaries per month 5,000
Delivery expenses per unit 0.50
Utilities (sales showroom) per month 4,000
Administrative salaries per month 20,000
Marketing expenses per month 8,000
Insurance expense per month 11,000
Depreciation expense per month 9,000
Required
: (a) Prepare a Sales and Administrative Expense Budget for the three months (in columnar form) in the quarter ending 30 June 2023, separating variable and fixed expenses. (12 marks)
(b) Briefly discuss any FOUR purposes of budgeting in organisations.
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