GRANADA Ltd is a manufacturing company and is preparing its annual budget for the year-ended 30^thJune 2021. It manufactures and sells two products and the assistant accountant has already produced the following budgets for the period:

Product A

Product B

Total

Total Sales Revenue Budget

4,045,900

Production Budget

191,475 units

164,213 units

Production Overhead Absorption Rate

3.00 per machine hour

Standard Production Cost Per Unit

6.00

Forecast demand and resource requirements for each unit of its two products are as follows:

Product Name

Product A

Product B

Sales (units)

195,800

165,300

Selling price

8.00

15.00

Direct materials (0.60 per kg)

2.5 kg's

3.5 kg's

Direct labour hours (15.00 per hour)

0.1 hours

0.3 hours

Machine hours

1.0 hour

0.5 hours

Granada Ltd values all stocks at standard production cost and its stock control policy ensures that closing stocks of finished goods are at 1.5 month's sales and stocks of raw materials are equal to 1 month's usage. The following opening stock levels are expected at 1^stJuly 2020:

Raw Materials

Product A

Product B

72,050 kg's

28,800 units

21,750 units

Annual production overheads are budgeted to cost 820,744 and are absorbed on a machine hour basis. Selling and administration overheads are budgeted to cost 942,750 for the year.

REQUIRED:

(a)Prepare the following for the year:

1.Direct materials usage/purchases budget; (4 marks)

2.Direct labour budget; (2 marks)

3.Standard production cost per unit for Product B; (4 marks)

4.Total production cost budget; and (5 marks)

5.Budgeted income statement. (5 marks)

In your opinion, do you think that GRANADA Ltdwould benefit from preparing its budgets using a rolling-budget based approach? Give reasons for your answer.