Question 1

Coro Ltd makes two products, Quara and Lock. The following data are relevant for the year ending 31^st December 2020:

Material prices

Material M GHS2 per unit

Material N GHS3 per unit

Direct labour is paid GHS10 per hour.

Production overhead cost is estimated to be GHS 200,000. Production overhead cost is absorbed into product costs using a direct labour hour absorption rate. Selling and administration overhead is budgeted to be GHS 75,000.

Each unit of finished product requires:

			Quara		Lock
Material M			12 units		12 units
Material N			6 units		8 units
Direct labour			7 hours		10 hours

The sales director has forecast that sales of Quara and Lock will be 5,000 and 1,000 units respectively during the year 2020. The selling prices will be as follows:

Quara GHS182 per unit Lock GHS161 per unit

She estimates that there will be opening inventory of 100 units of Quara and 200 units of Lock. At the end of the year 2020, the company does not intend holding any inventory of Quara and Lock.

The Production Director estimates that the opening inventories of raw materials will be 3,000 units of M and 4,000 units of material N. At the end of the year 2020, the inventories of these raw materials are to be:

13. 4,000 units
14. 2,000 units

Statement of financial position extracts for year ended 31^st December 2019 are as follows:

Inventory of finished goods GHS 15,000

Inventory of Raw materials GHS 20,000

Retained earnings GHS 81,000

The Finance Director advises that the rate of tax to be paid on profits during the year 2020 is likely to be 30%.

Required:

1. Prepare all functional budgets and budgeted statement of profit or loss for the year ending 31^st December (12 marks)