Question #2 (40 marks)

The following sales forecast was developed by the sales team at a M& M Manufacturing Company Limited for the months indicated. The company produces two products Bassinets and Swings

Sales Forecast 2021

Details	Bassinets	Swings
July	1.500 units	2,000 units
August	1,750 units	2,250 units
September	1,900 units	2,000 units
October	1,400 units	1,600 units
November	1,700 units	1,500 units
December	2,200 units	2,300 units

Notes:

1. To make one unit of bassinet four (4) units of raw material F250 is used. One unit of F250 costs $40. Swings uses two (2) units of raw material K200 which costs $30 each.
2. 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.
3. During the year, the company sold one unit of Bassinet for $110, while one unit of Swing was sold for $150.
4. The decision was made that at the end of each month there should be in store sufficient finished goods stock to meet twenty percent (20%) of the sales for the next month.

Required:

Prepare the following budgets for the months of August to November 2021:

1. Sales budget for both products (6 marks)
2. Production budget for both products (10 marks)
3. Direct raw materials usage budget. (5 marks)
4. Direct raw material purchase budget. (15 marks)
5. Briefly explain, using two examples what is meant by a limiting budget factor

(4 marks)