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Budgeting Rothar Ltd - Leaving Cert Accounting - Question 9 - 2005
Question 9
Budgeting Rothar Ltd. manufactures two types of bicycle ‘Roadstar’ and ‘Climber’. The sales of each type of bicycle, and other relevant figures, for the year ended ... show full transcript
Worked Solution & Example Answer:Budgeting Rothar Ltd - Leaving Cert Accounting - Question 9 - 2005
Step 1
Sales Budget in units and in €.
Answer
To prepare the Sales Budget, we calculate the budgeted sales for both bicycles:
-
Roadstar:
- Budgeted quantities = 800 units
- Budgeted selling price = €220
- Budgeted Sales Value = 800 units × €220 = €176,000
-
Climber:
- Budgeted quantities = 500 units
- Budgeted selling price = €290
- Budgeted Sales Value = 500 units × €290 = €145,000
Thus, the completed Sales Budget is:
- Roadstar: €176,000
- Climber: €145,000
Step 2
Production Budget.
Answer
To prepare the Production Budget, we will start with the budgeted sales and adjust for stocks:
-
Roadstar:
- Budgeted sales = 800 units
- Add budgeted closing stock = 240 units
- Less budgeted opening stock = 1,020 units
- Budgeted Production = 800 + 240 - 400 = 640 units
-
Climber:
- Budgeted sales = 500 units
- Add budgeted closing stock = 180 units
- Less budgeted opening stock = 110 units
- Budgeted Production = 500 + 180 - 680 = 270 units
Step 3
Material Usage Budget.
Answer
To calculate the Material Usage Budget, we first determine the total material usage for each type:
-
Material A:
- Total usage for Roadstar = 640 units × 6 kg/unit = 3,840 kg
- Total usage for Climber = 270 units × 4 kg/unit = 1,080 kg
- Total Material A Usage = 3,840 kg + 1,080 kg = 4,920 kg
-
Material B:
- Total usage for Roadstar = 640 units × 4 kg/unit = 2,560 kg
- Total usage for Climber = 270 units × 6 kg/unit = 1,620 kg
- Total Material B Usage = 2,560 kg + 1,620 kg = 4,180 kg
The total material usage is:
- Material A: 4,920 kg
- Material B: 4,180 kg
Step 4
Material Purchases Budget.
Answer
Preparing the Material Purchases Budget involves:
-
Material A:
- Budgeted Material Usage = 4,920 kg
- Add Budgeted Closing Stock = 470 kg
- Less Budgeted Opening Stock = 740 kg
- Purchases Required = 4,920 + 470 - 740 = 4,650 kg
-
Material B:
- Budgeted Material Usage = 4,180 kg
- Add Budgeted Closing Stock = 930 kg
- Less Budgeted Opening Stock = 900 kg
- Purchases Required = 4,180 + 930 - 900 = 4,210 kg
Step 5
Labour Budget.
Answer
To create the Labour Budget, we calculate the total direct labour hours based on the production for both bicycles:
-
Roadstar:
- Direct labour time per unit = 8 hours
- Total production = 640 units
- Total Labour Hours = 640 × 8 = 5,120 hours
-
Climber:
- Direct labour time per unit = 11 hours
- Total production = 270 units
- Total Labour Hours = 270 × 11 = 2,970 hours
Combining both:
- Total Labour Requirement = 5,120 + 2,970 = 8,090 hours
At a rate of €14 per hour, the total labour cost is:
- Total Labour Cost = 8,090 × €14 = €113,260