QUESTION TWO Mulenga uses a budgeting system to control the costs and revenues of its only product, the Ruth. The management accountant for Mulenga has asked for your assistance in producing the budget for the year ending 31 December 2022. He has provided you with the following information: 1. The standard cost card for the Ruth for the year ended 31 December 2021 is as follows. K Selling price 250 Direct material (4 kg at K8-00 per kg) (32) Direct labour (6 hours at K15.00 per hour) (90) Contribution K128 2. Mulenga uses an additive time series analysis to forecast sales volume. The trend in sales and forecast seasonal variations for 2022 are given below. Quarter 1 2 3 Trend (sales units) 1,200 1,300 1,400 1,500 Seasonal variation (sales units) - 150 +200 +300 -350 3. The sales trend figures for the first two quarters of 2022 are estimated at 1,600 and 1,700 units respectively. Quarterly seasonal variations are expected to be as for 2021. 4. It is the policy of Mulenga to always carry sufficient inventory of finished goods to meet 50% of the next quarter's forecast sales, and sufficient raw materials to meet 80% of the next quarter's forecast production. Required: Produce the following budgets for each of the four quarters of the year ending 31 December 2022 (i) Sales budget, showing sales units and sales revenue. (3 marks) (ii) Production budget in units, showing opening inventory, production and closing inventory (8 marks) (11) Purchasing budget, showing opening inventory, purchases and closing inventory in kilograms and purchases in cost. (10 marks) (iv) Labour budget in hours and cost. (4 marks) [Total 25 Marks]