Question no.

1:

A Company manufactures two products, Aye and Bee. Standard cost data for the products for next year
are as follows:

Product A Product B
per unit per unit
Direct materials:
X at £2 per kg 24 kg 30 kg
Y at £5 per kg 10 kg 8 kg
Z at £6 per kg 5 kg 10 kg

Direct wages:

Unskilled at £3 per hour 10 hours 5 hours

Skilled at £5 per hour 6 hours 5 hours

Budgeted inventories (stocks) for next year are as follows:

Product A Product B
per unit per unit
January 01 400 800
December 31 500 1,100

Material X Material Y Material Z

kg kg kg
January 01 30,000 25,000 12,000
December 31 35,000 27,000 12,500

Budgeted sales for next year: product A 2,400 units; product B 3,200 units.

Required:

You are required to prepare the following budgets for next year:
a. Sales budget
b. Production budget
c. Direct material usage budget
d. Direct material purchase budget
e. Direct labor budget
f. Manufacturing cost budget
Question no.2:
Pak Swiss Ltd. Produces and markets a very popular product called “P”. The company is interested in
presenting its budget for the second quarter of 2009.The following information made available for this
purpose:

a- It expects to sell 50,000 bags of “P” during the second quarter of 2009 at the price of Rs. 9 per bag.
b- Each bag of” ‘P” requires 2.5 kgs. Of a raw material called ‘Q’ and 7.5 kgs of raw material called ‘R’.
c- Stock levels are planned as follows:
Beginning of quarter End of quarter

Finished bags of ‘P’(Units) 15,000 11,000

Raw material ‘Q’ (kgs) 32,000 26,000

Raw material ‘R’ (kgs) 57,000 47,000

Empty bags (no.s) 37.000 28,000

d- “Q” costs Rs. 1.20 per kg. and “R” costs 20 paisa per kg. and the empty bag costs 80 paisa each.
e- It requires 9 minutes of direct labor time t produce and fill one bag of “P”, labor cost is Rs. 5 per
hour.

Required:

1. Prepare a production budget for the second quarter.

2. Prepare a raw material purchase budget for “Q”, “R” and empty bags for the second quarter in
quantities as well as rupees

Question no. 3:
A sales budget for the first five months of 19A is given for a particular product line manufacture
by Karachi Co. Ltd.:

Sales Budget in Units

January 10,800

February 15,600

March 12,200

April 10,400

May 9,800
The inventory of finished products at the end of each month is to be equal to 25 percent of the
sales estimate for the next month. On January I-, there were 2,700 units of product on hand.

No work is in process at the end of any month.

Each unit of product requires two types of materials in the following quantities:

- Material A: 4 units

- Material B: 5 units

Materials equal to one-half of the next month’s requirements are to be on hand at the end of
each month. This requirement was met on January 1, 19A.

Required:

(a) Prepare a production budget for the first quarter of 19A.

(b) Prepare a budget showing the quantities of each type of material to be purchased each
month for the first quarter of 19A.