Page 193 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes Solution:

Production Budget for three months ending March 31, 2008

Particulars AA BB CC DD
Units Units Units Units
Estimated Sales 10,000 15,000 13,000 12,000
Add: Desired closing stock 5,000 4,000 3,000 2,000
15,000 19,000 16,000 14,000
Less: Opening Stock 2,000 3,000 4,000 5,000
Estimated Production 13,000 16,000 12,000 9,000

Task Mr. X Co. Ltd. manufactures two different products X and Y. X forecast of the
number of units to be sold in first seven months of the year is given below:
Months Product X Product Y
Jan. 1,000 2,800
Feb. 1,200 2,800
Mar. 1,600 2,400
Apr 2,000 2,000
May 2,400 1,600
June 2,400 1,600
July 2,000 1,800

It is expected that (a) there will be no work in progress at the end of every month,
(b) finished units equal to half the sales for the next month will be in stock at the end of
each month (including the previous December).

Budgeted production and production costs for the whole year are as follows:
Production in Units Product X Product Y
22,000 24,000
Per unit (Rs.) Direct Material 10.00 15.00
Direct Labour 5.00 10.00
Total factory overhead apportioned 88,000 72,000

9.4.2 Materials/Purchase Budget

This budget takes place only after identifying the number of finished products expected to
produce to the tune of production budget, in meeting the needs and demands of the customers
and consumers during the season.
In order to produce to the tune of production budget to meet the market demands, the raw
materials for the production should be maintained sufficient to supply them without any
interruption. To have uninterrupted flow of production, the firm should go for the immediate

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