Illustration 1

Given

Sales 450,000 Bags

Price 280 birr P/u
Dm
 Leather :- 10 Pounds P/unit
10 Birr Cost P/pound
 Chemicals:- 5 Pounds P/unit
10 birr cost P/pound
Dl
 Labor time 2 hour P/unit
 Labor cost 40 birr P/hour
MOH (Manufacturing Over Head)
 Indirect Material 12,000
 Indirect Labor 16,000
 Utilities 8,000
 Factory Insurance 10,000
 Factory Deprecation 12,000
Total MOH Cost 58,000
The selling and Administration cost86,000 P/year
Beginning Inventory
 Finished Bags 50,000 Unit
 Dm:- Leather 100,000 Pd
Chemical 50,000 Pd
Ending Inventory
 Finished Bags 100,000 Unit
 Dm:- Leather 100,000 Pd
Chemical 50,000 Pd
The beginning Inventory 50,00 units of bags cost birr 220 P/unit

1
Illustration 1

Answer

A) Seles Budget

Sales for Bags to sold 450,000

Sales for Price P/unit x 280.00.00
Total Sales Price 126,000,000

B) Production Budget

Ending finished Bags 100 000

+ Unit of Bags to be sold 450.000
= Total Bags available for sale 550,000
- Beginning finished Bags 50,000
= Total Bags to be produced 500,000

C) DM Usage and Purchase budget

Leather
Ending Leather in pounds 100,000.00
+ Leather to be used in Prod. 5,000,000.00 (500,000x10)
= Total Leather available for sale 5,100,000.00
- Beginning leather in Pound 100,000.00
= Leather to be purchased 5,000,000.00
X cost of leather Purchased x 10.00
= total cost of leather to be Purchase 50,000,000.00

2
Chemical
Ending Chemical in pounds 50,000.00
+ Chemical to be used in Prod. 5,000,000.00 (500,000x10)
= Total Chemical available for sale 5,100,000.00
- Beginning Chemical 100,000.00
= Chemical to be purchased 5,000,000.00
X Cost of Chemical Purchased x 10.00
= Total cost of leather to be Purchase 50,000,000.00

D) Direct Labor Budget

Total Hrs, required for Production 1,000,000.00 (500,000 x Hrs)

Labor cost P/hr X 40 Birr
Total DL 40,000,000.00

* Production cost Budget

Direct material cost:-
 Leather 50,000,000.00
75,000,000.00
 Chemical 25,000,000.00
Direct labor cost 40,000,000.00
Indirect labor cost 58,000.00
Total cost of production 115,058,000.00

* cost of Bag P/unit = Total cost of Production

Total bags to produces

Cost of bag P/unit = 115,058,000.00

500,000.00
= 230.116
= 230.12

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E) Ending Inventory Budgets (Determine cost P/unit)

Ending Inventory 100,000 x 230.12 = 23,012,00.00

F) Budgeted Cost of Goods sold

Cost of Beginning finished bags 11,000,000.00 (50,000 x 220)

+ Cost of bags to be produced 115,058,000.00
= Total cost of bags available 126,056,000.00
- Cost of ending finished bag (23,012,000.00) (100,000 x 230.12)
= Cost of bags sold 103,046,000.00

G) Budgeted Income Statement

Revenue

Sales 126,000,000.00
- Cost of good sold 103,046,000.00
Gross profit 22,954,000.00
- Selling and Admin. Expense (86,000.00) (given)
Operating Profit 22,868,000.00

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Illustration 2

Given

Sales unit in quarter 24,000 ; 20,000 ; 30,000 ; 32,000

Price P/unit 1,500 P/u through the year
Beginning Inventory 2000 units
Ending Inventory 10% of the units to be sold in the quarter itself
Purchased and made ready for sale at cost birr 1,200 P/u

Operating expense Through the year

 Selling expense 8,000
 Advertizing expense 3,000
 Salary expense 24,000
 Depreciation expense 6,000
 Miscellanea expense 1,000
Total 42,000

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 Illustration 2
Answer
A) Sales budget

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

Unit to be sold 24,000 20,000 30,000 32,000 106,000
Selling Price X 1,500 X 1,500 X 1,500 X 1,500 X 1,500
ToTal 36,000,000 30,000,000 45,000,000 48,000,000 159,000,000

B) Purchase Budget

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

Ending inventory(10%
of each quarter unit sold) 2,400 2,000 3,000 3,200 10,600
+ unit to be sold 24,000 20,000 30,000 32,000 106,000
- Beginning inventory 2,000 2,400 2,000 3,000 1,096,040,000
Cost P/u 24,400.00 19 600.00 31,000.00 32,200.00 107,200.00
X 1,200.00 X 1,200.00 X 1,200.00 X 1,200.00 X 1,200.00
Total 29,280,000 23,520,000 37,200,000 38,640,000 128,640,000

C) Ending Inventory budget

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

Ending inventory 2,400 2,000 3,000 3,200 10,600
(10% of each Quarter unit
sold)
Selling Price X 1,200 X1,200 X1,200 X1,200 X1,200
ToTal 2,880,000 2,400,000 3,600,000 3,840,000 1,272,000,000

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D) Cost of goods sold budget (interms of cost)

Cost of beginning inventory 2,400,000.00 (2,000 X 1,200)

+ Purchase during the year 128,640,000.00
= cost of TVs Available of sale 131,040,000.00
- ending inventory (3,200 x 1,200) 3,849,000.00
= cost of TVs sold 127,200,000.00

E) Budgeted income Statement

Revenue

Sales 159,000,000.00
- Cost of good sold 127,200,000.00
= Gross profit 31,800,000.00
- Selling and Admin. exp. 42, 000.00 ( given)
= Operating Income 31,758,000.00 (Before Tax)