Arjuna Sdn Bhd is preparing its annual budgets for the year to 31 December 2016. It manufactures and sells one product, which has a selling price of RM130. The marketing Director believes that the prices can be increased to RM140 with effect from 1 July 2016 and that at this price the sales volume for each quarter of 2016 will be as follows: Sales Volume Quarter 1 Quarter 2 Quarter 3 Quarter 4 30,000 40,000 20,000 35,000 Sales for each quarter 2017 are expected to be 30,000 units. Each unit of the finished product requires four units of components A and three units of component B, together with a body shell C (Component C). These items are purchased from an outside supplier and their current prices are: RM Component A Component B Component C 7.00 each 4.00 each 20.00 each The component are expected to increase price by 10% with effect from 1 April 2016, no change is expected for the price of the shell. Assembly of the shell and components into the finished product requires 6 labour hours; labour is currently paid RMS5.00 per hour. A 4% increase in wage cost is anticipated to take effect from 1 October 2016. Variable overhead costs are expected to be RM9 per unit for the whole of year 2016, fixed production overhead costs are expected to be RM240,000 for the year and are absorbed on a per unit basis. Stocks on 31 December 2015 are expected to be as follows: 8,000 units 2,000 units 4,500 units 400 units Finished units Component A Component B Component C Closing stocks at the end of each quarter are to be as follows: Finished units Component A Component B Component C 10% of next quarter's sales 20% of next quarter's production requirement. 15% of next quarter’s production requirement 10% of next quarter’s production requirement
Arjuna Sdn Bhd is preparing its annual budgets for the year to 31 December 2016. It manufactures and sells one product, which has a selling price of RM130. The marketing Director believes that the prices can be increased to RM140 with effect from 1 July 2016 and that at this price the sales volume for each quarter of 2016 will be as follows: Sales Volume Quarter 1 Quarter 2 Quarter 3 Quarter 4 30,000 40,000 20,000 35,000 Sales for each quarter 2017 are expected to be 30,000 units. Each unit of the finished product requires four units of components A and three units of component B, together with a body shell C (Component C). These items are purchased from an outside supplier and their current prices are: RM Component A Component B Component C 7.00 each 4.00 each 20.00 each The component are expected to increase price by 10% with effect from 1 April 2016, no change is expected for the price of the shell. Assembly of the shell and components into the finished product requires 6 labour hours; labour is currently paid RMS5.00 per hour. A 4% increase in wage cost is anticipated to take effect from 1 October 2016. Variable overhead costs are expected to be RM9 per unit for the whole of year 2016, fixed production overhead costs are expected to be RM240,000 for the year and are absorbed on a per unit basis. Stocks on 31 December 2015 are expected to be as follows: 8,000 units 2,000 units 4,500 units 400 units Finished units Component A Component B Component C Closing stocks at the end of each quarter are to be as follows: Finished units Component A Component B Component C 10% of next quarter's sales 20% of next quarter's production requirement. 15% of next quarter’s production requirement 10% of next quarter’s production requirement
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Transcribed Image Text:Arjuna Sdn Bhd is preparing its annual budgets for the year to 31 December 2016. It
manufactures and sells one product, which has a selling price of RM130. The marketing
Director believes that the prices can be increased to RM140 with effect from 1 July 2016 and
that at this price the sales volume for each quarter of 2016 will be as follows:
Sales Volume
Quarter 1
Quarter 2
Quarter 3
Quarter 4
30,000
40,000
20,000
35,000
Sales for each quarter 2017 are expected to be 30,000 units. Each unit of the finished product
requires four units of components A and three units of component B, together with a body
shell C (Component C). These items are purchased from an outside supplier and their current
prices are:
RM
Component A
Component B
Component C
7.00 each
4.00 each
20.00 each
The component are expected to increase price by 10% with effect from 1 April 2016, no
change is expected for the price of the shell. Assembly of the shell and components into the
finished product requires 6 labour hours; labour is currently paid RM5.00 per hour. A 4%
increase in wage cost is anticipated to take effect from 1 October 2016.
Variable overhead costs are expected to be RM9 per unit for the whole of year 2016, fixed
production overhead costs are expected to be RM240,000 for the year and are absorbed on a
per unit basis. Stocks on 31 December 2015 are expected to be as follows:
Finished units
8,000 units
Component A
Component B
Component C
2,000 units
4,500 units
400 units
Closing stocks at the end of each quarter are to be as follows:
10% of next quarter’s sales
20% of next quarter's production requirement.
15% of next quarter’s production requirement
10% of next quarter's production requirement
Finished units
Component A
Component B
Component C
Transcribed Image Text:Required:
a.Prepare the following budgets of Arjuna Sdn Bhd for each of the four quarters for the year
ending 31 December 2017.
i.
Production Budget ( in units)
ii.
Material Usage Budget (in units)
iii.
Production Cost Budget (in RMs)
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