Reference no: EM132409527
Kambuna Ltd expects to manufacture and sell handbags and has the following information for 2019.
(1) Sales price of a handbag in January 2019 is $150 and is expected to increase by 10% in February and 15% in March.
(2) Product costs per unit:
Direct material (2 metres @ $20) $40.00
Direct labour (1.5 hour @ 10.00) $15.00
Overheads $10.00 $65.00
(3) Budgeted sales for the first six month period are:
Month Number of bags
January 20,000
February 22,000
March 18,000
April 30,000
May 26,000
June 30,000
(4) Inventory policy and beginning inventory balances:
Type
Quantities
Finished goods
20 % of the handbags required for the next month's sales. Balance on 1 January 2019 is 5,000 handbags costing $300,000
Direct materials
40% of the materials required for the next month's sales. Balance on 1 January 2019 is 2,000 metres.
Required:
a) Prepare a sales budget for the first quarter of 2019
b) Prepare production budgets in units for the first quarter of 2019.
c) Prepare a purchases budget in metres for the first quarter of 2019, giving total purchases in both metres and dollars for each month.
d) Prepare a direct labour budget for the first quarter of 2019.
e) Calculate the budgeted income statement up to gross profit, for the first quarter 2019.