Four Star Ltd manufactures and sells a single product. They operate a budgetary

control system with budgets prepare every $3$ months. They are preparing their

budget for the first quarter of $2011$ and have collected the following data:

Forecast sales units

January $24,000$

February $28,000$

March $30,000$

April $32,000$

May $32,000$

They plant to hold stocks of finished goods at the end of each month equal to $25\%$

of next month$$s sales. Anticipated stocks at the end of $2010$ will be $6,000$ units.

They plan to hold raw material stock at the end of each month equal to $10\%$ of next

month$$s production requirements. The anticipated stocks at the end of $2010$ will be:

Material X $7,500$ kilos

Material Y $5,000$ kilos

The budgeted costs for the period are:

Unit cost

Direct material $-$ X $3$ kilos at $$5$ per kilo

$-$ Y $2$ kilos at $$4$ per kilo

Direct labour $-4$ hours at $$8$ per hour

Overheads $-$ Variable production $$6$ per direct labour hour

$-$ Fixed production $$546,000$ for the first quarter

$-$ Fixed selling and distribution $$364,000$ for the first quarter

$-$ Fixed administration $$91,000$ for the first quarter

The product selling price is estimated to be $$100$ per unit.

Required:

$($a$)$ Calculate production budget in units for each month and for the first quarter

of $2011.(6$ marks$)$

$($b$)$ Compute purchasing budget in kilos and in $ for material X only for each

month and for the first quarter of $2011.(10$ marks$)$

$($c$)$ Prepare production cost budget, by element of cost for the first quarter.

$(3$ marks$)$