Question 5

Clinton Limited manufactures one product. The budgeted sales for period 6 are for 10,000 units at a selling price of RM100 per unit. Other details are as follows:

1. Two components are used in the manufacture of each unit:

Component	Number	Unit cost of each component (RM)
XY	5	1
WZ	3	0.5

2. Stocks at the beginning of the period are expected to be as follows:

CONFIDENTIAL

a. 4,000 units of finished goods as at a unit cost of RM52.50.

b. Component XY: 16,000 units at a unit cost of RM1.

c. Component WZ: 9,600 units at a unit cost of RM0.50.

3. Two grades of employees are used in the manufacture of each unit:

Employee	Hours per unit	Labour rate per hour
	(units)	(RM)
Production	4	5
Finishing	2	7

4. Factory overhead is absorbed into unit costs on the basis of direct labour hours. The budgeted factory overhead for the period is estimated to be RM96,000.

5. The administration, selling and distribution overhead for the period has been budgeted at RM275,000.

6. The company plans a reduction of 50 per cent in the quantity of finished stock at the end of period 6, and an increase of 25 per cent in the quantity of each component.

Required:

Prepare the following budgets for period 6:

(a) Sales

(b) Production quantity

(c) Materials usage

(d) Materials purchase

(e) Direct labour

(f) The budgeted profit and loss account

(25 Marks)