The preparation of budgets Example 1

Example 1
The XYZ company produces three products, X, Y, and Z. For the coming accounting period
budgets are to be prepared using the following information:
Budgeted sales
Product X 2,000 units at $100 each
Product Y 4,000 units at $130 each
Product Z 3,000 units at $150 each
Standard usage of raw material
Wood
(kg per unit)
Varnish
(litres per unit)
Product X 5 2
Product Y 3 2
Product Z 2 1
Standard cost of raw material $8 $4
Inventories of finished goods
X Y Z
Opening 500u 800u 700u
Closing 600u 1,000u 800u
Inventories of raw materials
Wood
(kg)
Varnish
(litres)
Opening 21,000 10,000
Closing 18,000 9,000
Labour
X Y Z
Standard hours per unit 4 6 8
Labour is paid at the rate of $3 per hour
Prepare the following budgets:
(a) Sales budget (quantity and value)
(b) Production budget (units)
(c) Material usage budget (quantities)
(d) Material purchases budget (quantities and value)
(e) Labour budget (hours and value