Question

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)

Answer 1