Questions:
ABC Ltd. produces and sells a single product. Sales budget for the calendar year 2011 for each quarter is as under:
|
Quarter
|
No. of Units to be Sold
|
|
I
|
12,000
|
|
II
|
15,000
|
|
III
|
16,500
|
|
IV
|
18,000
|
The year 2011 is expected to open with an inventory of 4,000 units of finished product and close with an inventory of 6,500 units. Production is customarily scheduled to provide for two-thirds of the current quarter's demand plus one-third of the following quarter's demand. Thus production anticipates sales volume by about one month. The standard cost details for one unit of the product is as follows:
- Direct materials 10 Kgs. @ Rs.50 paise per kg.
- Direct labour 1 hour 30 minutes @ Rs.4 per hour.
- Variable overheads 1 hour 30 minutes @ Rs.1 per hour.
- Fixed overheads 1 hour 30 minutes @ Rs.2 per hour based on a budgeted production volume of 90,000 direct labour hours for the year.
Answer the following:
(i) Prepare a production budget for the year 2011 by quarters, showing the number of units to be produced.
(ii) If the budgeted selling price per unit is Rs.17, what would be the budgeted profit for the year as a whole?
(iii) In which quarter of the year the company is expected to break-even?