Reference no: EM132429821

Question - 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.