Softlan Limited manufactures one product known as Eco1. The following information relates to the preparation of the budget for the year to 31 March 2020: 1) Sales budget details for product Eco1: Expected selling price per unit: RM100. Expected sales in units: 10,000. All sales are on credit terms. 2) Eco1 requires 5 units of raw material E and 10 units of raw material C. E is expected to cost RM3 per unit and C RM4 per unit. All goods are purchased on credit terms. 3) Two departments are involved in producing Eco1: machining and assembly. The following information is relevant: Direct labour per unit of product (hours) Direct labour rate per hour RM Machining 1.00 6 Assembling 0.50 8 4) The finished production overhead costs are expected to amount to RM100,000. 5) At 1 April 2019, 800 units of Eco1 are expected to be in stock at a value of RM52,000, 4,500 units of raw material E at a value of RM13,500, and 12,000 units of raw materials at a value of RM48,000. Stocks of both finished goods and raw materials at 31 March 2020 are planned to be 10 per cent above the expected opening stock levels as at 1 April 2019. 6) Administration, selling and distribution overhead is expected to amount to RM150,000. 7) Other relevant information: a) Opening trade receivables are expected to be RM80,000. Closing trade receivables are expected to amount to 15 per cent of the total sales for the year. b) Opening trade payables are expected to be RM28,000. Closing trade payables are expected to amount to 10 per cent of the purchases for the year. c) All other expenses will be paid in cash during the year. d) Other balances at 1 April 2011 are expected to be as follows: RM RM Share capital: ordinary shares 225,000 Retained earnings 17,500 Proposed dividend 75,000 Fixed assets at cost 250,000 Less: Accumulated depreciation 100,000 150,000 Cash at bank and in hand 2,000 8) Capital expenditure will amount to RM50,000, payable in cash on 1 April 2019. 9) Fixed assets are depreciated on a straight-line basis at a rate of 20 per cent per annum on cost. Required: As far as the information permits, prepare all the relevant budgets for Softlan Limited for the year to 31 March 2020
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.
Softlan Limited manufactures one product known as Eco1. The following information relates to the preparation of the budget for the year to 31 March 2020:
1) Sales budget details for product Eco1:
Expected selling price per unit: RM100.
Expected sales in units: 10,000.
All sales are on credit terms.
2) Eco1 requires 5 units of raw material E and 10 units of raw material C. E is expected to cost RM3 per unit and C RM4 per unit. All goods are purchased on credit terms.
3) Two departments are involved in producing Eco1: machining and assembly. The following information is relevant: Direct labour per unit of product (hours) Direct labour rate per hour
RM
Machining 1.00 6 Assembling 0.50 8
4) The finished production
5) At 1 April 2019, 800 units of Eco1 are expected to be in stock at a value of RM52,000, 4,500 units of raw material E at a value of RM13,500, and 12,000 units of raw materials at a value of RM48,000. Stocks of both finished goods and raw materials at 31 March 2020 are planned to be 10 per cent above the expected opening stock levels as at 1 April 2019.
6) Administration, selling and distribution overhead is expected to amount to RM150,000.
7) Other relevant information:
a) Opening trade receivables are expected to be RM80,000. Closing trade receivables are expected to amount to 15 per cent of the total sales for the year.
b) Opening trade payables are expected to be RM28,000. Closing trade payables are expected to amount to 10 per cent of the purchases for the year.
c) All other expenses will be paid in cash during the year.
d) Other balances at 1 April 2011 are expected to be as follows:
RM RM
Share capital: ordinary shares 225,000
Proposed dividend 75,000
Fixed assets at cost 250,000
Less:
Cash at bank and in hand 2,000
8) Capital expenditure will amount to RM50,000, payable in cash on 1 April 2019.
9) Fixed assets are depreciated on a straight-line basis at a rate of 20 per cent per annum on cost.
Required:
As far as the information permits, prepare all the relevant budgets for Softlan Limited for the year to 31 March 2020
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