Question

1. You are required to prepare a Direct Material Budget for the second quarter (April to June) by considering a manufacturing company operating in Saudi Arabia as a sample study.                                                                            (4marks)

2. You are required to prepare the Sales price variance and Revenue sales quantity variance by taking any of your choice Saudi based company and suggest the suitable reasons for the variances.                                                                  (3marks)

3. You are required to allot the support department cost to operations department by taking any Saudi based operating company.                               (3marks)

Answer 1

Direct material budget is essential to be prepared at the beginning of every quarter or every month. This is because the direct material budgets shows the amount of material that is required to fulfill the manufacturing needs and also the policy of safety stock for the company.

Sales price variance means that the product is not sold at the price that has been budgeted for that product. This may be because the price of actual sale is high or low than the budgeted sales price of the product.

Revenue sales quantity variance happens when the actual sales quantity of a product does not actual get sold for that quantity

The reason for sales price variance and sales quantity variance is same, this happens when the demand of a product get reduced because of some change in the technology and because of obsolesce.

  

Service department work for the production department of the company, the cost that service department incurs is finally allocated to the production departments in some of the percentages that is based on some of the predetermined rule book.