QUESTION 1

The following information has been assembled by Sancross Products Ltd which manufactures and retails products A and B. The details given below relate to the year commencing 1 July 2000:

Standard Product

Price per kg A kg g

Direct material M1 Sh 4 15 20

M2 Sh 5 14 12

Standard Product

Rate per hour A hours B hours

Direct labour L1 Sh 8 20 15

L2 Sh 10 22 24

Fixed production overhead is applied on direct labour basis. Administration, selling and distribution expenses are recovered at the rate of 20% of production cost and profit loaded at 25% of standard production cost.

Product

A B

Sh 000 Sh 000

Projected sales for the year 12,033 10,053

Finished goods stock position valued at production cost is expected to be as follows:

Product

A B

Sh 000 Sh 000

1 July 2000 3,000 2,000

30 June 2001 5,000 4,000

Direct material stocks valued at standard prices are as follows:

Material

M1 M2

Sh 000 Sh 000

1 July 2000 200 250

30 June 2001 220 270

For the year to 30 June 2001, fixed production overhead has been estimated at

Sh 1,800,000 and direct labour at 1,200,000 hours.

No opening or closing work-in-progress is anticipated.

Required:

a) Production budget in units.

b) Direct materials cost budget.

c) Purchases budget in value.

d) Direct labour cost budget.