QUESTION 5

Slaf Company is preparing its master budget for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows.

Sales Quarter	Expected Sales (units)
1	480,000
2	600,000
3	720,000
4	600,000

Sales in the first quarter of 2018 are expected to be 10% higher than the budgeted sales for the first quarter of 2017.

Production

Management desires to maintain the ending finished goods inventories at 25% of the next quarters budgeted sales volume.

Direct materials

Each unit requires 3 kilograms of raw materials at a cost of RM5 per kilogram. Management decided to maintain raw materials inventories at 5% of the next quarters production requirements. Assume the production requirements for the first quarter of 2018 are 1,620,000 kilograms.

Instructions:

(a) Prepare the production budget by quarters for 2017. (8 marks)

(b) Prepare the direct materials budget by quarters for 2017. (12 marks)

Show all your workings.