Reference no: EM132561278

Case Study - Musicova Pty Ltd

Musicova Pty Ltd produces a single product which uses one direct material. The specification for this product has been determined as:

Direct material: 3 kilogram @ $2.00 per kilogram

Direct labour: 1 hour @ $12.00 per direct labour hour

Factory overhead: applied at the rate of $10.00 per direct labour hour

The sales budget for the coming year has been prepared and an extract shows:

Month                   Sales Units

July                      15 000

August                  10 000

September              10 000

October                    15 000

Management requires closing stock of finished goods at the end of each month to be equal to 50% of the following months sales. Finished goods stock on hand at 1 July is expected to be 7000 units.

There have been no cost changes for some months and there are no expected cost increases until December. Factory overhead under or over applied is not recorded on a monthly basis.

Required:

Question a. Production budget

Question b. Direct materials budget

Question c. Direct labour budget.