Urban-X Limited manufactures and sells t-shirts to students called ALPHA and OMEGA. In

September 2019, the management accountant in the budgeting department gathered the following

data to prepare budgets for 2020:

Projected sales for 2020 is estimated at 60 000 units of ALPHA at a unit price of N$70 and

40 000 units of OMEGA at a unit price of N$100. It is expected that inventories are:

Product Expected: 1 Jan 2020 (units) Desired: 31 Dec 2020 (units)

ALPHA 20 000 25 000

OMEGA 8 000 9 000

In order to produce one unit of ALPHA and OMEGA, the following raw materials are used:

Raw material Unit ALPHA OMEGA

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Rim Kg 4 5

Ram Kg 2 3

Lexe Each 0 1

Projected data for 2020 with respect to raw material are as follows:

Raw material Anticipated

purchase price

Expected

inventories:

1 Jan 2020

Targeted

inventories:

31 Dec 2020

Rim N$8 per kg 32 000 kg 36 000 kg

Ram N$5 per kg 29 000 kg 32 000 kg

Lexe N$3 per unit 6 000 units 7 000 unit

Projected direct-labour requirements and rates for 2020 are as follows:

Product Hours per unit Rate per hour

ALPHA 2 N$3

OMEGA 3 N$4

Manufacturing overhead is allocated at the rate of N$2 per direct labour hour.

REQUIRED: MARKS

9.1 Explain what a master budget is.

9.2 "Strategy plans and budgets are unrelated to one another." Do you agree?

Explain.

9.3 Based on the projections above and the budget requirements for ALPHA

and OMEGA, prepare the following budgets for 2017:

9.3.1 Sales budgets (in Namibian Dollars)

9.3.2 Production budget (in units)

9.3.3 Raw material purchase budgets in quantities

9.3.4 Raw materials purchases budget in Namibian Dollars

9.3.5 Direct labour budget in Namibian Dollars

9.3.6 Total budgeted finish goods inventory as at 31 December 2017 in

Namibian Dollars.