Hakim Sdn Bhd manufacturers water filtration system products that are used in both residential and commercial building. One of its products named product B is made using two different raw materials and two types of labour. The company operate a standard absorption costing system and now preparing its budgets for the first quarter for the year ending 31 December 2020.

In order to produce one unit of product B, two types of materials are required namely material X and Y. One unit of product B needs 5 kgs of material X at cost RM4 per kg. As for material Y, 3 kgs are needed at cost RM7 per kg.

Annual overheads are RM280,000. 40% of these overheads are fixed and the reminder for variable overhead. Fixed overheads are absorbed on a unit basis.

As for companys inventory policy, closing inventory of finished goods is 30% of the following months sales volume and closing inventory of materials is 45% of the following months materials usage. Closing inventory as of 31 December 2019 for finished goods are 500 units, material X and Y are 1,500 kgs and 1,700 kgs respectively.

The selling price of the Product B is RM220 per unit. The following information has been identified for Product B.

The sales forecast for the year 2020 are as follows:

Months sales volume (units)

January 2250

February 2050

March 1650

April 2050

May 1250

June 2050

The management teams are concerned that Hakim Sdn Bhd has recently faced intense competition in the marketplace for Product B. Consequently, there have been issues concerning the availability and costs of specialized materials and employees needed to manufacture Product B, and there is concern that these might cause a problem in the current budget setting process.

Required:

Prepare the following budgets of Hakim Sdn Bhd for each month of the first quarter for the year ending 31 December 2020.

i. Production Budget in units. ii. Raw material budget in kgs and value for material X.