Solution-Prepare flexible budgets for the final quarter at

Prepare flexible budgets for the final quarter at production

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Reference no: EM13878766

Great Lakes Co. is about to commence the final quarter of activity for the current financial year. The results for the first three quarters of the year have been as follows:

	Q1	Q2	Q3
Sales volume	12,000	20,000	18,000
Production volume	15,000	25,000	18,000
Costs (£000) Direct materials	150	250	180
Direct labour	130	190	148
Depreciation of plant	12	12	12
Other production overheads	50	70	56
Administration costs	30	30	30
Selling and distribution costs	38	50	47
Total costs	410	617	473

Notes:

(i) The variable elements of production costs are related to the volume of production. The variable element of selling and distribution costs is related to the volume of sales.

(ii) During the fourth quarter of the year sales volume is expected to range between 18,000 and 24,000 units; production will be set equal to sales in the quarter. The company has been informed that the unit price of materials will increase by 8% in the fourth quarter.

(iii) For the whole of the year the selling price is £30 per unit.

Prepare flexible budgets for the final quarter at production (and sales) levels of 18,000 and 24,000 units. Forecast the profit at these sales levels.

Reference no: EM13878766

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Prepare flexible budgets for the final quarter at production

Reference no: EM13878766

Reference no: EM13878766

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