OBJECTIVE: The purpose of this task is to enable learners to understand an organisations financial goals through the preparation of operating, financial, and cash budgets that together integrate into a business plan

REQUIREMENT: Budgets and Budgetary Controls

Question

ABC PTD LTD. manufactures and supplies granite pots and pans with glass lids to a company in Japan. The new manager, John, wants to monitor the quarterly budgets for the quarter ending 30^th September 2021 to ensure the sales targeted can be executed as planned even with the current economic condition. The following information is available:

Budgeted sales:
POTS 60,000 units @SGD100 each		PANS 40,000 units @SGD125 each
Budgeted inventories:
	Beginning		Ending
Pots Pans Direct material (Granite) Direct material (Glass) Direct material (Handles)	20,000 8,000 32,000 kg 29,000 kg 6,000 units		25,000 10,000 36,000 kg 32,000 kg 7,000 units

Standard variable costs:

	POTS		PANS
Direct materials: Granite Glass Handles Total materials	5kg @SGD8.00 3kg@SGD5.00 1 @SGD3.00	SGD40.00 15.00 3.00 58.00	4kg @SGD8.00 3kg@SGD5.00	SGD32.00 15.00 47.00
Direct labour Variable manufacturing overhead Total	2hours@SGD12.00 2hours@SGD1.50	24.00 3.00 85.00	3hours@SGD16.00 3hours@SGD1.50	48.00 4.50 99.50

Variable manufacturing overhead cost is SGD384,000, while fixed factory overhead is SGD214,000 per quarter (including the non-cash expenditure of SGD156,000) and is allocated on total units produced.

Financial information follows:

• Beginning cash balance is SGD1,800,000
• Sales are on credit and are collected 50 percent in the current period and the remainder in the next period. Last quarters sales were SGD8,400,000. There are no bad debts.
• Purchases of direct materials and labor costs are paid for in the quarter acquired.
• Manufacturing overhead expenses are paid in the quarter incurred.
• Selling and administrative expenses are all fixed and are paid in the quarter incurred. They are budgeted at SGD340,000 per quarter, including SGD90,000 of depreciation.

Required:

For the quarter ending 30^th September 2021, prepare the following:

1. Sales budget.

2. Production budget in units.

3. Direct materials usage and purchase budget (Granite, Glass & Handles).

4. Direct labor budget.