Question b and d

Management Accounting

4G 1 % % (1) 10:50 PM 4G 11% 40 QUESTION 3 Insulation Ltd has been established to manufacture insulation material for use in houses. The company is in the process of preparing its budgets for six months ended December 31, 2020. You are given the following information: Budgeted manufacturing costs for the product are as follows: Factory overhead: Variable: 2.25 per unit produced Fixed: 1,312.50 per month Direct materials 2.55 per kg Direct labour 6.00 per unit produced Expected sales, production and materials used are as follows: Expected July August September Sales (units) 1,200 1,350 1,650 October to December 1,950 Opening inventory (units) 120 The closing stock at the end of each month is expected to be 10% of next month's sales. The following information on direct materials to be used is also available: Standard cost is 2.55 Each unit of product Insulation Ltd requires 6 kg of direct materials. Closing inventory is expected to be 10% of next month's production requirements. The amount for August is expected to be 672 kg. Opening inventory in July 2020 is 597 kg Additional information The selling price of a unit of insulation material is 82.50. Cash collections: 90% in the month of sale; 8% in the month following the sale; and 2% uncollectable. 4G 1 % % (1) 10:50 PM 4G 11% 40 Expected payments for direct materials: 75% of each month's purchases paid for in the month of purchases, and the remainder to be paid for in the following month. Payments for direct labour and factory overhead costs to be made in the month in which the expenses will be incurred. Required: (a) Prepare the following budgets for July and August showing the values for each month and the total for the two months: (i) Production budget in units (5 marks) (ii) Materials usage budget in units. (5 marks) (iii)Materials purchase budgets in units and 's (5 marks) (b) Prepare a budget of the cash receipts and disbursements for the month of July. Calculate to the nearest . (10 marks) Sections (a) and (b): approximately 250 words (c) Explain the main objectives of preparing budgets and critically evaluate the statement: "The sales budget is the foundation of all other budgets. (30 marks) approximately 300 words (d) Discuss six behavioural aspects of budgeting. (45marks) approximately 450 words In section (c & d) students should demonstrate both knowledge and understanding of the budgeting approaches within theoretical viewpoints. The response should attempt to incorporate a discussion through relevant academic referencing, rather than overly describing the model and should be referenced as per Harvard referencing requirements. [This should be approximately 1,000 words. Total of 100 marks]