QUESTION You are an accountant at Sepang Bikes Company, Sepang Bikes Company is a bicycle manufacturer durable. The marketing manager expects an increase in sales of rugged bikes due to the success ongoing advertising campaigns. So the management asks you provide a master budget taking into account the increase in sales. In order to prepare a budget, information must first be gathered from various sources such as selling price, expenses involved, cost of raw materials and so on. The following is information that has been collected: 1. The estimated sales is 100,000 units of rugged bicycles with a price of RM800 per unit. 2. According to accounting records, the initial stock balance is 2,500 bicycles with a unit cost of RM454.75, With the increase in sales then the management sets the final balance of the stock is 3,500 units. 3. Initial balance of direct raw materials: RM Wheels and tires 20,000 70,000 components 50,000 frames Total 140,000 4. Cost per unit of direct material is expected: RM Wheels and tires 20 Component 70 Frame 50 5. The manager wants the final inventory: RM Wheels and tires 25,000 87,500 components 62,500 frames Total 175,000 6. The quantity and cost of direct labor per unit is expected to: Labor Hours Cost per hour Installation 1.5 RM25 Test 0.15 RM15 7 7. For overhead, you use information you gathered from last years operations and update with current prices. Production overhead costs per unit are expected as follows: Overhead changes (cost per unit): RM Supply 20.00 Indirect labor 37.50 Maintenance 10.00 Various _7.50 Total 75.00 8. You expect a total of RM20,200,000 to be spent on manufacturing overhead costs remains as follows: Depreciation of RM404,000; Property tax: 1,010,000; Insurance: 1,414,000; Factory supervisor RM5,050,000; Fringe benefits: RM7,070,000; Various: RM1,616,000. Overhead costs are absorbed by the amount of production spent. 9. You also estimate the operating costs for the support department. These costs are fixed costs: Administrative costs: RM16,478,215; Promotion: RM9,886,929; delivery: RM4,943,465; customer service: RM1,647,821. 10. Income tax is expected at the rate of 30%. You as an accountant are required to provide: a. The following budgets: i. Sales budget ii. Production budget iii. Budget of direct raw materials used as well as purchase budget. iv. Direct labor budget v. Factory overhead budget vi. Final stock budget vii. Budget the cost of sales items viii. Budget support department ix. Income Statement Budget (32 marks) b. Briefly explain FOUR (4) importance of cash budget and how they relate with organizational strategy (8 marks) (Total: 40 marks)