QUESTION 1 [25%) K plc manufactures Product K using three different raw materials. The product details are as follows: Selling price per unit RMESD Material riaalwaaa ara- Material ariaalaaaaaa ar k- Marr-sisal price Ems-50 per kg Labour rate HMS-u per hour The company is considering its budgets for next year and has made the following estimates of sales demand for Product X for Jul to October: Au-uat It is company policy to hold stocks of finished goods at the end of each month equal to SCH-i: of the following month's sales demand: and it is expected that the stock at the start of the budget period will meet this policy. At the end of the production process the products are tested: it is usual for 10% of those tested to be faulty. It is not possible to rectify these faulty units. Raw material stocks are expected to be as follows on 1 July: Stocks are to be increased by lull-i: in July. and then remain at their new level for the foreseeable future. Labour is paid on an hourly rate based on attendance. In addition to the unit direct labour hours shown above, 20% of attendance time is spent on tasks which support production actiyity. Required: Prepare the following budget for the quarter from July to September: Sales budget in quantity and value (3 MARKS) b. Production budget in units (3 MARKS) C. Raw material usage budget in kgs (3 MARKS) d. Raw material purchased budget in kgs and value (3 MARKS) e. Direct labour cost budget (1 MARKS) d. "The manager of the company argued that budgeting is useless. (12 MARKS) Creating and monitoring a budget can be time consuming. Budgeting could create competition and conflict between teams or departments. If targets are unrealistic, employees could become stressed and under pressure. Budgets can sometimes be manipulated by management to present a more favorable financial picture, either to meet performance targets or to secure funding. This can lead to unrealistic expectations and poor decision-making." Discuss SIX (6) points based on your arguments against to the statement above with an example.QUESTION 2 (25%) KHL PLC located at Kuala Lumpur, Malaysia. The company manufactures wooden benches for both indoor and outdoor use. Results of variance analysis report have been disappointing in recent years. Peter, who has just been appointed accountant of the KHL PLC, has been given instructions to 'get things under control'. Upon reviewing the plant's profit statement, Peter has concluded that the major problems lies in the variable cost of goods sold. He has been provided with the following standard costs per wooden benches: Standard quantity Standard price or |Standard cost rate Direct materials 6kg RM4.00 per kg RM24.00 Direct labour 1.6 hours RM12.00 per hour RM19.20 Variable 0.8 hours* RM6.00 per hour RM4.80 manufacturing overhead *based on machine hours RM24.00 Peter has determined that during June the plant produced 15,000 units and incurred the following costs: Purchased 120,000 kilos of materials at a cost of RM3.90 per kilo. Used 98,400 kilos of materials in production. (Finished goods and work in progress stocks are insignificant and can be ignored). Worked 23,600 direct labour hours at a cost of RM14.00 per hour. . Incurred variable manufacturing overhead cost totaling RM36,580 for the month. A total of 11,800 machine hours was recorded. . It is the company's policy to close all variances to cost of goods sold on a monthly basis.Required: a. Compute the following variance i. Direct material price variance (2 MARKS) ii. Direct material usage variance (2 MARKS) iii. Direct labour rate variance (2 MARKS) Nilai University/Academic /Set 1 Page 3 of 6 v. Direct labour efficiency (2 MARKS) vi. Total material cost variance (2 MARKS) vii. Total labour cost variance (2 MARKS) b. "Standard costing cannot improve the organisation (13 MARKS) performance" Do you agree? Justify your reasons