QUESTION 2 (20 MARKS)

A. Gxsport is a small business manufactures sportswear focusing on tracksuits. Gxsport perform very well in 2021 with yearly sales amounting to RM630,000, equivalent to 12,600 pieces sold. For the 1st quarter of 2022, the sales are predicted to increase by 7% as compared to 2021s sales due to the raised of awareness for a healthy lifestyle.

The price of the tracksuit is RM50 per piece. The labour rate is RM7 per hour and each piece of tracksuit requires 0.4 hours to make. Manufacturing overheads are charges at RM1.50 per piece. The inventory is expected to have a balance of 500 pieces of tracksuits as at 1st January 2022 and increase by 10% as at 31st March 2022.

Calculate the production budget (in unit) for the 1st quarter 2022 (1st January to 31st March 2022). (8 marks)

B. The following information is extracted from Sosana Hotels management report for the month of January 2022.

Additional information, 70% of Sosana Hotels revenue is received in cash and the remaining 30% on credit. All credit sales are expected to be collected in the following month. Assume that there were no credit sales and credit purchases in December 2021. Based on the given information, prepare a cash budget for the month ended 31st January 2022 to calculate ending cash balance. (8 marks)

C. Define budgetary slack. (2 marks)

D. Explain a reason for a person to commit budgetary slack. (2 marks)

Beginning cash balance Budgeted revenue Purchase of inventory by cash Cash repayment of bank loan RM 8,200 13,000 4,500 5,800