Ombi Ltd. specialises in seasonal novelty products and is considering the manufacture of a new range of items to coincide with a major sporting event. The range will initially comprise of 2 products, Flags and Bunting. To assist with budgeting, Ombi Ltd. has collated the following projected information for the month of July:

Projected Sales Quantity Sales Revenue per item (/) Flags 4,000 18 Bunting 2,000 50

Production Requirements Cost per metre Flags Bunting Material Cer /4.00 0.5m 4m Material Bac /2.00 1m 3m

Finished Inventory Flags Bunting 1st July 200 0 31st July 950 1,325

There is no opening or closing work in progress, however due to inefficiencies in the production process, management expect that 5% of output will not pass quality control and therefore cannot be sold.

Materials Inventory Cer Bac 1st July 6,000m 20,000m 31st July 10,200m 14,000m

Labour & Overhead The standard direct labour required to produce each Flag unit is 30 minutes and a Bunting unit takes 1 hour to produce. Labour is paid at /10 per hour. Variable overheads (which will be incurred evenly over the year) are projected at /360,000 per annum and these are to be absorbed into production on the basis of direct labour hours.

Requirement

(a) Prepare the following Budget Statements: Sales Budget Production Budget Material Purchasing Budget Labour Budget Overhead Absorption Budget

16 Marks

(b) Calculate the projected standard contribution per unit for Flags and Bunting 4 Marks