- 20 Marks
CIBG – FRPA 2022 – L3 – Q5 – Abenwooha Ltd Budgets Preparation
Prepare production, direct materials cost, purchases, labour utilization, and wages cost budgets for Abenwooha Ltd using the given data.
Question
Abenwooha Ltd. produces two products: products Asana and Pito. The two products use two materials: A and B in their production. Employees engaged to produce both products work in two departments: Dept. X and Dept. Y. The company uses a marginal costing system.
You have just assumed the post of Management Accountant at Abenwooha Ltd. After your induction week, the Financial Controller gives you the data below:
Budgeted Data Product Asana Product Pito GH¢’000 GH¢’000
Sales for the year 15,000 20,000
Standard data per unit of product: Standard price Product Asana Product Pito Direct materials GH¢ Per Kg Kg Kg A 2 50 100 B 4 100 50
Wages to direct workers: Standard wage rate Product Asana Product Pito GH¢ Per hour hours required hours required Dept. X 20 5 4 Dept. Y 40 4 5 The company’s budgeted total variable production overheads and fixed production overheads are GH¢6,000,000 and GH¢3,000,000 respectively. Budgeted labour hours is 600,000 hours. The company earns a markup of 20% on marginal production cost.
Finished goods inventories are valued at standard marginal production cost per unit and are as follows:
Product Asana Product Pito GH¢’000 GH¢’000
Opening inventories 720 840 Closing inventories 432 798
You are required to: Use the data given above to prepare the following budgets:
(a) Production budget in units
(b) Direct materials cost budget
(c) Direct materials purchases budget
(d) Direct labour utilization budget
(e) Direct wages cost budget
(Total: 20 marks)
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