Question 1

The sales team at Joel Brown Manufacturing Company Ltd decided on the following sales forecast for the months indicated. The company produces two products Clam and Glam

Sales Forecast 2016

Details	Clam	Glam
July	3,000 units	4,000 units
August	3,500 units	4,500 units
September	4,000 units	3,800 units
October	2,800 units	3,200 units
November	3,400 units	3,000 units
December	4,200 units	4,600 units

Notes:

(i) To make one unit of Clam three (3) units of raw material Z508 is used. One unit of Z508 costs $80. Glam uses two (2) units of raw material K500 which costs $60 each.

(ii) The company has decided that raw material stocks at the end of each month should be held equivalent to fifteen percent (15%) of the budgeted sales for the month in question.

(iii) During the year, the company sold one unit of Clam for $220, while one unit of Glam was sold for $300.

(iv) The decision was made that at the end of each month there should be in store sufficient finished goods stock to meet thirty percent (30%) of the sales for the next month.

Required:

(a) Prepare the companys sale budget for the period August to November 2016. (6 marks)

(b) Prepare the production budget for both products for the period August to November 2016. (10 marks)

(c) Prepare the direct raw materials usage budget for the period August to November 2016. (5 marks)

(d) Prepare the direct raw materials purchases budget for the period August to November. (15 marks)

(e) Briefly explain, using an example what is meant by a limiting budget factor. (4 marks)

(f) Give three (3) benefits that could be achieved from the budgetary process. (6 marks)

(g) Describe what happens if management uses the sales force composite method to predict sales demand. (4 marks)