Games Ltd manufactures two types of game boys called 'Game Boy Pocket' and 'Game Boy Light' - Leaving Cert Accounting - Question 9 - 2017

Production Budget

1. Budgeted Sales:

   • Game Boy Pocket: 4,500 units
   • Game Boy Light: 2,400 units

2. Add Budgeted Closing Stock:

   • Game Boy Pocket: 520 units
   • Game Boy Light: 340 units

3. Less Budgeted Opening Stock:

   • Game Boy Pocket: 650 units
   • Game Boy Light: 410 units

4. Calculation:

   • Game Boy Pocket: $4,500 + 520 - 650 = 4,370$
   • Game Boy Light: $2,400 + 340 - 410 = 2,330$

5. Budgeted Production in Units:

   • Game Boy Pocket: 4,370 units
   • Game Boy Light: 2,330 units

Material Usage Budget

1. Material Requirements:

   • Game Boy Pocket:
     • Material A: $4,370 imes 5 = 21,850$ grams
     • Material B: $4,370 imes 6 = 26,220$ grams
   • Game Boy Light:
     • Material A: $2,330 imes 2 = 4,660$ grams
     • Material B: $2,330 imes 3 = 6,990$ grams

2. Total Material Usage:

   • Material A: $21,850 + 4,660 = 26,510$ grams
   • Material B: $26,220 + 6,990 = 33,210$ grams

Materials Purchases Budget

1. Budgeted Usage:

   • Material A: 26,510 grams
   • Material B: 33,210 grams

2. Add Budgeted Closing Stock:

   • Material A: 200 grams
   • Material B: 330 grams

3. Less Budgeted Opening Stock:

   • Material A: 160 grams
   • Material B: 290 grams

4. Calculations:

   • Material A: $26,510 + 200 - 160 = 26,550$
   • Material B: $33,210 + 330 - 290 = 33,250$

5. Budgeted Purchase Price:

   • Material A: €5
   • Material B: €3

6. Total Costs:

   • Material A: $26,550 imes 5 = €132,750$
   • Material B: $33,250 imes 3 = €99,750$

7. Total Purchases Budget: €232,500

Labour Budget

1. Budgeted Production:

   • Game Boy Pocket: 4,370 units
   • Game Boy Light: 2,330 units

2. Number of Hours per Unit:

   • Game Boy Pocket: 3 hours
   • Game Boy Light: 4 hours

3. Total Labour Hours:

   • Game Boy Pocket: $4,370 imes 3 = 13,110$ hours
   • Game Boy Light: $2,330 imes 4 = 9,320$ hours

4. Labour Rate per Hour: €9

5. Total Labour Cost Calculation:

   • Total hours: $13,110 + 9,320 = 22,430$ hours
   • Total Labour Cost: $22,430 imes 9 = €201,870$

Purpose of Production Budget

The production budget is essential for planning the number of units to be manufactured. It ensures that Games Ltd can meet expected sales demand while also accounting for inventory management. This aids in forecasting materials required and scheduling labor, ensuring that production aligns with financial resources and operational capacity.