Jamdown & Associates Ltd produces two products, Glam120 and Glam220. The followi
ID: 2431008 • Letter: J
Question
Jamdown & Associates Ltd produces two products, Glam120 and Glam220. The following table provides information on budgeted production for 2018:
Production Forecast
Product
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Total
Glam120
5,000
6,000
4,800
5,500
21,300
Glam220
6,500
4,600
5,400
6,200
22,700
Notes:
It is the company’s policy to have stock on hand at the end of each quarter equaling to 10% of production for the next quarter.
Budgeted production for the first quarter of 2019 were: Glam120, 7,000 units and Glam220, 5,800 units.
During 2018, the company plans to sell one unit of Glam120 for $600 and one unit of Glam220 for $700.
Management has forecasted that variable overhead cost per unit for Glam120 and Glam200 would be $100 and $120 respectively during 2018, while fixed overheads for the same period were estimated to be $2,400,000 and would be incurred in equal amounts quarterly.
Required:
Calculate the number of units to be sold for both products during each quarter of 2018. (10 marks)
Prepare the sales budget for 2018. (5 marks)
Prepare the overhead cost budget for the four quarters in 2018. (5 marks)
Explain what is meant by a limiting budget factor. (2 marks)
Describe two limiting factors that could influence the achievement of Jamdown & Associates profit objectives for 2018. (3 marks)
Product
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Total
Glam120
5,000
6,000
4,800
5,500
21,300
Glam220
6,500
4,600
5,400
6,200
22,700
Explanation / Answer
1) Product GLAM 120 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Opening Stock - 600 480 550 Add: Production 5,000 6,000 4,800 5,500 Goods available 5,000 6,600 5,280 6,050 Less: Closing stock required@10% of next month production 600 480 550 700 =7000*10% Units sold 4,400 6,120 4,730 5,350 Product GLAM 220 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Opening Stock - 460 540 620 Add: Production 6,500 4,600 5,400 6,200 Goods available 6,500 5,060 5,940 6,820 Less: Closing stock required@10% of next month production 460 540 620 580 =5800*10% Units sold 6,040 4,520 5,320 6,240 2) Sales Budget Quarter 1 Quarter 2 Quarter 3 Quarter 4 GLAM 120 a Units sold 4,400 6,120 4,730 5,350 b Sales Price 600 600 600 600 c=a*b Sales in $ 2,640,000 3,672,000 2,838,000 3,210,000 GLAM 220 a Units sold 6,040 4,520 5,320 6,240 b Sales Price 700 700 700 700 c=a*b Sales in $ 4,228,000 3,164,000 3,724,000 4,368,000 3) Overhead Cost Budget GLAM 120 a Production 5,000 6,000 4,800 5,500 b Variable Overhead per unit 100 100 100 100 c=a*b Variable overhead cost 500,000 600,000 480,000 550,000 d Fixed Overhaed cost 600,000 600,000 600,000 600,000 =2400000/4 e=c+d Total Overhead cost 1,100,000 1,200,000 1,080,000 1,150,000 GLAM 220 a Production 6,500 4,600 5,400 6,200 b Variable Overhead per unit 120 120 120 120 c=a*b Variable overhead cost 780,000 552,000 648,000 744,000 d Fixed Overhaed cost 600,000 600,000 600,000 600,000 =2400000/4 e=c+d Total Overhead cost 1,380,000 1,152,000 1,248,000 1,344,000 4) Limiting factor is the factor that restricts the expansion of business when budget is prepared. It may be direct labour,machine hour, sales or other similar factor.
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