Question

Question 3:                                        &nbs

Question 3:                                                                                                            [18 marks]

You need to prepare the budget for Yellow tree for the quarter ending June 2018. The budget must be prepared monthly. The quarter consists of 13 weeks. The forecasted sales are as follows:

April

4 weeks

May

5 weeks

June

4 weeks

July

4 weeks

Sales Units

1,250

1,500

1,750

1,800

The company’s policy changed the inventory policy to keep closing inventory of completed units at 25% of the following month’s sales. Opening inventory on the 1st of April was 475 units. The labour information is as follows:

Normal working hours

8 hours per day

Weekend work

None, only if overtime is required.

Number of employees

20 currently

Additional 10 employees will be employed for the month of June

Normal time rate

R32.50 per hour

Overtime rate

30% above normal time rate per hour

Hours per unit

3 hours

Required:

1.    Calculate the production budget for the quarter.                                                     (3)

   2.    Calculate the budgeted labour hours per month. Split the hours between normal time and overtime. (9)

   3.    Calculate the budgeted labour cost monthly. Split the cost between normal time and overtime. (6)   

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