Question 2 (20 marks) Star Industrial Ltd is planning to prepare various operating budgets for the next three months from October to December. The following estimated financial data is available from the budgeting department: Oct 25.000 Estimated sales (units) Sales price per unit Direct labour hour per unit Direct labour rate per hour Nov 25,000 S 31 $1.75 $21 $31 Dec 27,000 $ 32 $1.50 $24 Jan 27,500 $ 32 Feb 28,000 $ 32 $1.50 S24 $1.75 $21 $1.50 $24 New machinery will be added in December. This machine will reduce the labour hours required per unit and increase the labour rate for those employees qualified to operate the machinery, Other relevant information for the preparation of budgets is available as follows: The beginning inventory in August is 3,750 units of finished goods and 13,125 pounds of materials. - Each unit of product requires 2.5 pounds of direct material at a cost of $5 per pound. - The required ending inventory of finished goods is 20% of the next month's estimated sales units. New machinery will be added in December. This machine will reduce the labour hours required per unit and increase the labour rate for those employees qualified to operate the machinery. Other relevant information for the preparation of budgets is available as follows: The beginning inventory in August is 3,750 units of finished goods and 13,125 pounds of materials. Each unit of product requires 2.5 pounds of direct material at a cost of $5 per pound. The required ending inventory of finished goods is 20% of the next month's estimated sales units. The required ending inventory of direct materials is 20% of the next month's production needs. Q2 Prepare the following operating budgets for the three month period from October to December (in columnar format); (a) Production budget (6 marks (b) Direct material usage and purchase budget (9 marked (c) Direct labour budget