Reference no: EM132323818
Question
Sturn Technology Ltd has projected sales of its product for the second of the year as shown below:
July 40units
August 90units
September 100units
October 80units
November 30units
December 70units
Other relevantinformation:
i] The product will be sold for $100 each. The selling and administration variable expenses will be $15 per unit and fixed expenses will be $2,500 permonth.
ii] The finished product will require 3 units of raw material and 10 hours of direct labour. The company pays $20 per hours to theirworkers.
iii] It is the company policy to maintain an ending inventory of finished goods equal to the next two months of sales and an ending inventory of raw materials equal to half of the current month's usage. Each unit of material cost$25.
Required:
Prepare the following budgets for Sturn Technology Ltd for the months of August, September and October; and for quarter ended 31 October.
(a) Salesbudget.
(b) Production budgetinunits.
(c) Direct material purchase budget in units andin$.
(d) Sturn Technology Ltd is currently using high-low method as one of the tools to predict cost. Describe, apart from the high-low method, two other methods that could be used by Sturn to separate the fixed and variable costs from the semi-variable costs. Indicate one strength and one weakness of each of the three methods (including the high-low method).
Keep to 2 decimal places whereapplicable.