Question 4

Rayyan Builder Berhad manufactures specialist insulating products that are used in both residential and commercial buildings. One of the products, Product W, is made using two different raw materials and two types of labour. The company operates a standard absorption costing system and is now preparing its budgets for the next six quarters. The following information has been identified for Product W:

Sales:

Selling price

RM250 per unit

Sales demand:

Quarter 1

2,250 units

Quarter 2

2,050 units

Quarter 3

1,650 units

Quarter 4

2,050 units

Quarter 5

1,250 units

Quarter 6

2,050 units

Costs:

Materials:

A

5 kgs per unit @ RM5 per kg.

B

3 kgs per unit @ RM8 per kg.

Labour Skilled

4 hours per unit @ RM16 per hour.

Semi-skilled

6 hours per unit @ RM10 per hour.

Annual overheads

RM320,000

Inventory policy:

Closing inventory of finished goods - 30 per cent of the following quarter's sales demand.

Closing inventory of materials - 45 per cent of the following quarter's materials usage.

Required:

Prepare the following budgets for each quarter for Rayyan Builder Berhad:

a)Sales budget.

(5 marks)

b)Production budget in units.

(5 marks)

c) Raw material purchases budget in kgs and value for Material A.

(8 marks)

d)Raw material purchases budget in kgs and value for Material B.

(8 marks)

e)Direct labour budget for skilled labour in hours and RM.

(2 marks)

f)Direct labour budget for semi-skilled labour in hours and RM.

(2 marks)

[Total: 30 marks]