Ivan Lloyd Processing Company expects in 2019 to increase by 10% the products sold the previous year total 40,000 units.  At the start of 2019, the company has finished goods of 6,000 units and plans to maintain an inventory of 8,000 and the end of 2019.

To produce one finished product, the company requires 3 units of raw materials OP and 4 units of raw materials QR.  One unit of raw materials OP and one unit of raw materials QR costs P4 and P7 respectively.

The inventory level of the raw materials is as follows:

                                                        Material OP  Material QR

  January 1 (actual) 4,000   3,000   December 31 (target) 5,000   4,000

 

Required: Determine the estimated cost to purchase the total raw materials requirement.

 

Activity 2: Finance terms to Enrich Your Business English Vocabulary:

 Check a finance dictionary or surf the Internet for the meaning of the following technical terms or jargons.

1.   Budgeting

2.   Strategic plan

3.   Medium-term plan

4.   Short-term plan

5.   Budgetary control

 

Problem on Budgeting:

Problem 1. 

Nicolas Manufacturing Company sold 12,000 units of Product NN is 2018.  It expects to increase its sales volume by 10% next year.  The inventory data of Product NN are as follows:

           Beginning inventory (actual)             3,000 units

           Ending inventory (estimates)            4,500 units

 

Required: Determine the number of units that must be produced by Nicolas Manufacturing Company.

 

Problem 2.

        Mark Manufacturing Company sells its goods on cash basis and on account.  It has been the experience of the business that 60% of the sales on account are collected on the month of sales; 30% are collected on the second month; 8% are collected on the third month; and the remainders are not usually collected.

 The Sales on account data during the last quarter of 2018 appear as follows:

           October                         P       150,000

           November                               225,000

           December                              250,000

The business expects the following sales for the first quarter of 2019.

                                      Cash Sales         Sales on Account

           January               P       120,000      P       200,000

           February                       150,000               250,000

           March                           180,000               300,000

 

Required: Make a schedule of the estimated cash receipts for the first quarter of 2019.

 

Exercises 1: 

1.   Describe the items reflected in the sales budget.

2.   List the items included in the production budget

3.   Identify the items that comprise the operating budget

Exercises 2: Word Problems

           Roel Trading Company presents the actual sales for the first three months of year 2019 in its own products as follows:

			Product A	Product B	Total Sales
Janaury			P 340,000	P 540,000	P 880,000
February			P 374,000	P 567,000	P 941,000
March			P 411400	P 595,350	P 1,006,750

 

The business expects that the trends for the past three months will continue in April and May 2019.

  Required: Determined the projected sales for April and May 2019 for the two products.  Round the amounts to thousand pesos.