Question Manufacturing Budget BYTB would like to consider purchasing the meringue manufacturing plant in South Australia after the year lease expires as they see great potential in the meringue market As part of the decision making process, BYTB would like to draw up two 5 year budgets to determine if the best option is to continue leasing or purchase the plant Units sales 450,000 Price per unit $ 7 50 PRIME COSTS Ingredients $0 80 Labour $2 50 Manufacturing overhead $1 60 INVENTORY $ UNITS Ingredients $37,600 47,000 Finished goods $164,150 33,500 Marketing and sales costs $865,300 Administration and management cost $654,500 Additional information The budget is to be created in a traditional manner Unit sales are forecast to increase by 5 pa and the sales price will increase by 2 5 pa The production manager wants to maintain a target safety stock of raw materials sufficient to supply four weeks (4) based on the current years budgeted production and finished goods inventory levels to be kept at two (2) weeks At June 30, 2020, there was enough raw materials available to manufacture 47,000 units and 33,500 completed units in the finished goods warehouse The plant has the practical capacity to generate 530,000 units per annum Costs are forecast to increase at the inflation rate of 2 9 over the 5 years Manufacturing costs of raw materials, labour and overhead are expected to increase at the same rate as the inflation rate For tax purposes the rate is predicted to stay at 30 Required 1 Develop a sales, production and purchases budget as well as a budgeted schedule of Cost of Goods Manufactured, Schedule of Cost of goods sold and an income statement for each of the 5 years in the budget period (Commencing 2022) The budget must take into consideration the practical production capacity constraint 2 BYTB believes there is an opportunity to increase production capacity to 650,000 units by leasing an additional set of production machines Due to the size of the leased order, it will take two years before the machines can be commissioned The lease of the machine is $120,000 per year and will be ready to be included in the production process on the 1 st of July, 2024 Using a separate worksheet, build into your model what would happen to sales and production capacity if the additional machine were purchased

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Question Manufacturing Budget BYTB would like to consider purchasing the meringue manufacturing plant in South Australia after the year lease expires as they see great

Question Manufacturing Budget

BYTB would like to consider purchasing the meringue manufacturing plant in South Australia after the year lease expires as they see great potential in the meringue market. As part of the decision-making process, BYTB would like to draw up two 5-year budgets to determine if the best option is to continue leasing or purchase the plant.

Units sales			450,000
Price per unit			$ 7.50

PRIME COSTS
	Ingredients		$0.80
	Labour		$2.50
	Manufacturing overhead	$1.60

INVENTORY		$	UNITS
	Ingredients	$37,600	47,000
	Finished goods	$164,150	33,500

Marketing and sales costs			$865,300
Administration and management cost			$654,500

Additional information:

The budget is to be created in a traditional manner.
Unit sales are forecast to increase by 5% pa and the sales price will increase by 2.5% pa.
The production manager wants to maintain a target safety stock of raw materials sufficient to supply four weeks (4) based on the current years budgeted production and finished goods inventory levels to be kept at two (2) weeks. At June 30, 2020, there was enough raw materials available to manufacture 47,000 units and 33,500 completed units in the finished goods warehouse.
The plant has the practical capacity to generate 530,000 units per annum.
Costs are forecast to increase at the inflation rate of 2.9% over the 5 years. Manufacturing costs of raw materials, labour and overhead are expected to increase at the same rate as the inflation rate.
For tax purposes the rate is predicted to stay at 30%

Required:

1. Develop a sales, production and purchases budget as well as a budgeted schedule of Cost of Goods Manufactured, Schedule of Cost of goods sold and an income statement for each of the 5 years in the budget period. (Commencing 2022). The budget must take into consideration the practical production capacity constraint.

2. BYTB believes there is an opportunity to increase production capacity to 650,000 units by leasing an additional set of production machines. Due to the size of the leased order, it will take two years before the machines can be commissioned. The lease of the machine is $120,000 per year and will be ready to be included in the production process on the 1^st of July, 2024. Using a separate worksheet, build into your model what would happen to sales and production capacity if the additional machine were purchased?