Question 2 (20 Marks)

The role of management accountants has been well-known to the corporate world as they widely contribute for performing planning, controlling and decision making functions effectively and efficiently through providing solid accounting information with good analysis. Liebherr Industries has been growing in terms of revenue and its customer base over the past decade. The Board of Directors of the company has been claiming that they should have one management accountant for their company to achieve better performance in the coming periods.

Production and Cost Details

Liebherr manufactures and sells many replacement parts for its equipment. PX-111 is one of such parts that has following cost and selling price structure:

Information		$ per unit
Selling Price		700
Direct Material	300 (per unit of material)	300
Direct Labour cost	50 per hour	300
Number of labor hours needed to manufacture one unit of product	6 hours
Fixed Costs for the company		$40,000

Estimations for the next year 2021

The company has estimated the following information;

(i) Sales Estimations

	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Number of units to be sold (Units)	1,000	1,100	1,200	1,300

(ii) Inventory estimations

Inventory	Beginning (first quarter)	Ending
Finished Goods	200 units	The company desires to have an ending inventory each quarter equal to 25% of the next quarters sales. The first quarters sales for the following year (2022) is expected to be 1,400 units
Materials	$120,000	The company desires the ending balance in materials inventory to be 45% of the next quarters cost of materials. The cost of materials for the first quarter in the following year (2022) is expected to be $170,400

Required:

Based on the estimated information given above, prepare

1. Sales Budget (10 marks)
2. Production Budget (10 marks)