You are an accountant at Sepang Bikes Company, Sepang Bikes Company is a manufacturer of durable bicycles. The marketing manager expects an increase in sales of rugged bikes due to the success of the ongoing advertising campaign. Therefore, the management asks you to prepare a master budget taking into account the increase in sales.

To prepare a budget, information must be collected in advance from various sources such as sales prices, expenses involved, the cost of raw materials and so on. The following information 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, the management sets the final stock balance is 3,500 units.

3. Initial balance of direct raw materials:

RM

Wheels and tires 20,000

Components 70,000

Frames 50,000

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

Components 87,500

Frames 62,500

Total 175,000

6. Quantity and direct labor cost per unit is expected to:

Labor Hours Cost per hour

Installation 1.5 RM25

Test 0.15 RM15

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 fixed manufacturing overhead costs 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; Miscellaneous: 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:

vii. Budget the cost of sales items

viii. Budget support department

ix. Income Statement Budget