Answered: Explain THREE limiting assumptions of…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

Problem 16E

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B. Explain THREE limiting assumptions of cost volume profit.

C. Roose manufactures a product called Wye. The owners of Roose are preparing the budgets for the three months ending December 2020. Expected sales in units are shown below.

	October 2020	November 2020	December 2020	January 2021
Units of Wye	5,700 units	6,080 units	6,384 units	4,788 units

One completed Wye contains 3.40 kg of material, costing RM 9.30 per kg.

Inventory as at 1 Oct 2020

Inventory decision

Finished product (units) of Wye

1,425 units

Closing inventory in any month should represent

25% of the next month’s expected sales

Material (kg)

25,000 kg

This is to be reduced at a constant rate to 16, 000 kg by the end of December 2020

Required:

Prepare for each of the months October to December 2020, the Production Budget for finished products Wye.
Prepare, for each of the months October to December 2020, the Materials Purchases Budget.

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