Reference no: EM132889238

Problem - Zachry Berhad, an office supplies specialty store, prepares its operating budget on a quarterly basis. The following data have been assembled to assist in preparing budgets for the second quarter ending June 30, 2021.

i. The budgeted sales for the next five months are listed as below:

Month units

April 20,000

May 50,000

June 30,000

July 25,000

August 15,000

ii. The company sells the single product at RM10 per unit

iii. A policy has been implemented that requires the company to maintain its ending inventory at 20 percent of the following month's budgeted sales. At the beginning of the second quarter, Zachry Berhad had 4,000 units of inventory.

iv. Every single unit of product requires 5 kg of raw material. The policy has been established that materials on hand at the end of each month must be equal to 10 percent of the following month's production. At the beginning of the second quarter, Zachry Berhad has 13,000 kg of direct raw material on hand. The direct materials cost is RM0.40 per kg.

v. Each unit of the product requires 3 minutes of direct labor and the workers will be paid at RM10 per hour.

Required -

a. Prepare the Sales Budget for the second quarter 2021.

b. Prepare the Production Budget for the second quarter 2021.

c. Prepare the Material Usage Budget and the Material Purchase Budget for the second quarter 2021.

d. Prepare the Direct Labor Budget for the second quarter 2021.

e. Briefly explain the importance of budget in terms of controlling purposes.