Question
Tremor manufactures two products, Winnex and Amora, which use raw materials, BX and DG. One unit of Winnex uses 3 litres of BX and 4
Tremor manufactures two products, Winnex and Amora, which use raw materials, BX and DG. One unit of Winnex uses 3 litres of BX and 4 kilograms of DG. One unit of Amora uses 5 litres of BX and 2 kilograms of DG. A litre of BX is expected to cost $3 and a kilogram of DG $7.
Sales and finished goods inventory budget for the year 2002 are as follows:
Winnex | Amora | ||
Budgeted Sales | 8,000 units | Budgeted Sales | 6,000 units |
Opening Inventory | 1,500 units | Opening Inventory | 300 units |
Closing Inventory | 600 units | Closing Inventory | 600 units |
Selling Price | $200 | Selling Price | $300 |
Inventories of raw material are 6,000 litres of BX and 2,800 kilograms of DG at 1 January, 2002 and the company plans to hold 5,000 litres and 3,500 kilograms, respectively, at 31, December 2002.
The warehouse and stores managers have suggested that a provision should be made for damages and deterioration of items held in store, as follows.
Product | |
Winnex | Loss of 50 units |
Amora | Loss of 100 units |
Raw Materials | |
BG | Loss of 500 litres |
DG | Loss of 200 kilograms |
The standard direct labour content of product Winnex is three hours and two hours for Amora. The budgeted productivity ratio of direct labour is only 80% for both products (which means that labour is only working at 80% efficiency).
The company employs 18 direct operatives to work on both products at a rate of $20 per hour and are expected to average 2,000 working hours each for the year.
Required:
- Prepare the following budgets for the year 2002:
- Sales
- Production budget
- Raw material usage budget
- Raw Materials purchases
- Direct labour budget
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