Newton Ltd manufactures two products. The expected sales for each

product are shown below.

Product 1

Product 2

Sales in units

3,000

4,500

Budgeting

Opening inventory is expected to be:

Product 1

500 units

Product 2

700 units

Management have stated their desire to reduce inventory levels, and

closing inventory is budgeted as:

Two types of material are used in varying amounts in the manufacture of

the two products. Material requirements are shown below:

The opening inventory of material is expected to be:

Material M1

4,300 kg

Material M2

3,700 kg

Management are keen to reduce inventory levels for materials, and

closing inventory levels are to be much lower. Expected levels are shown

below:

Material M1 2,200 kg

Material M2 1,300 kg

Material prices are expected to be 10% higher than this year and current

prices are $1.10/kg for material M1 and $3.00/kg for material M2.

Two types of labour are used in producing the two products. Standard

times per unit and expected wage rates for the forthcoming year are

shown below:

Skilled labour is to be paid at the rate of $9/hour and semi

skilled labour

at the rate of $6/hour.

Product 1

200 units

Product 2

300 units

Product 1

Product 2

Material M1

2 kg

3 kg

Material M2

3 kg

3 kg

Product 1

Product 2

Hours per unit

Skilled labour

3

1

Semi

skilled labour

4

4

Production overheads per labour hour are as follows:

Variable $3.50 per labour hour

Fixed $5.50 per labour hour

Calculate the following:

(a)

The number of units of product 1 to be produced

(b)

The number of units of product 2 to be produced

(c)

The quantity of material M1 to be used

(d)

The quantity of material M2 to be used

(e)

The quantity of material M1 to be purchased and the value of the

purchases

(f)

The quantity of material M2 to be purchased and the value of the

purchases

(g)

The number of hours of skilled labour and the cost of this labour

(h)

The number of hours of semi

skilled labour and the cost of this

labour

(i)

The total overhead budget