MANAGERIAL ACCOUNTING ASSIGNMENT

A.

Meridian Manufacturing Limited produces two products (P1 and P2) using two types of raw materials (M3 and M4). It is preparing its budgets for the year ending 31 December 2017. Expectations for 2017 include the following:

Production and sales:	P1	P2
Budgeted sales in units	6,000	4,800
Budgeted unit selling price	K500	K1,000
Opening stock of finished goods : in units	600	700
: valuation	K144,000	K182,000
Budgeted closing stock in unit	1,250	650

Normal losses occur at the end of the production process and 5% of the outputs of both products have to be scrapped. It is the companys policy that stock of finished goods is valued on a first-in first-out basis. There is no opening or closing work-in-progress.

(2) Direct materials:	M3	M4
Raw materials per unit of production: P1	10 kg	5 kg
P2	6 kg	8 kg
Opening stock of raw materials : in kg	20,000 kg	10,000 kg
: valuation	K200,000	K120,000
Budgeted closing stock in kg	12,000 kg	12,000 kg
Budgeted purchase price per kg	K10	K12

(3) Direct labour:

Standard direct labour time required for producing one unit of P1 and P2 are 30 minutes and 45 minutes respectively. Labour is paid at the rate of K120 per hour.

(4) Factory overheads:

The budgeted factory overheads for the year 2017 are K362,500. These overheads are to be absorbed in the production cost on a direct labour hour basis.

REQUIRED:

For Meridian Manufacturing Limited, prepare the following budgets (a) to (h) for 2017:

(a) Sales budget for each of the two products; (4 marks)

(b) Production budget (in units) for each of the two products; (8 marks)

(c) Direct material purchase budget for each of the two materials; (6 marks)

(d) Direct labour budget for each of the two products; (4 marks)

(e) Pre-determined factory overhead absorption rate; (2 mark)

(f) Factory cost of goods produced showing all cost elements for each of the two products; (10 marks)

(g) Unit production costs for each of the two products, rounded to dollar amount; (2 mark)

(h) Budgeted cost of goods sold for each of the two products. (6 marks)

B.

Explain the reason why some companies normally prepare the sales budget first among all functional budgets while the other companies start with the labour or other budget first in the budgetary planning process. (8 marks)