KK Limited is a company that manufactures made in Ghana clothes for the fashion industry. The fashion industry in Ghana is fast moving and consumer demand can change quickly due to the emergence of new trends. KK Limited manufactures three items of clothing: the GEM A, the GEM B and the GEM C using the same resources but in different amounts. Budgeted information per unit is as follows: GEM A GEM B GEM C GHS GHS GHS Selling price 250 40 100 Direct materials (GHS20 per cm) 100 10 30 Direct labour (GHS12 per hour) 36 12 27 Variable overheads (GHS3 per machine hours) 9 3 6.75 Total fixed costs are GHS300,000 per month. Included in the original budget constructed at the start of the year, was the sales demand for the month of March as shown below: GEM A GEM B GEM C Demand in March (units) 2,000 6,000 4,000 After the original budget had been constructed, items of clothing GEM A, GEM B and GEM C have featured in a fashion magazine. As a result of this, a new customer (a fashion retailer), has ordered 1,000 units each of GEM A, GEM B and GEM C for delivery in March. The budgeted demand shown above does not include this order from the new customer. In March there will be limited resources available. Resources will be limited to: Direct materials 14,500 cm Direct labour 30,000 hours There will be no opening inventory of materials, work in progress or finished goods in March. REQUIRED: Produce a statement that shows the optimal production plan and the resulting profit or loss for March
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
KK Limited is a company that manufactures made in Ghana clothes for the fashion industry. The fashion industry in Ghana is fast moving and consumer demand can change quickly due to the emergence of new trends. KK Limited manufactures three items of clothing: the GEM A, the GEM B and the GEM C using the same resources but in different amounts.
Budgeted information per unit is as follows:
|
|
GEM A |
GEM B |
GEM C |
|
|
GHS |
GHS |
GHS |
|
Selling price |
250 |
40 |
100 |
|
Direct materials (GHS20 per cm) |
100 |
10 |
30 |
|
Direct labour (GHS12 per hour) |
36 |
12 |
27 |
|
Variable overheads (GHS3 per machine hours) |
9 |
3 |
6.75 |
|
Total fixed costs are GHS300,000 per month. |
|||
|
Included in the original budget constructed at the start of the year, was the sales demand for the month of March as shown below: |
|||
|
|
GEM A |
GEM B |
GEM C |
|
Demand in March (units) |
2,000 |
6,000 |
4,000 |
After the original budget had been constructed, items of clothing GEM A, GEM B and GEM C have featured in a fashion magazine. As a result of this, a new customer (a fashion retailer), has ordered 1,000 units each of GEM A, GEM B and GEM C for delivery in March. The budgeted demand shown above does not include this order from the new customer.
In March there will be limited resources available. Resources will be limited to: Direct materials 14,500 cm
Direct labour 30,000 hours
There will be no opening inventory of materials, work in progress or finished goods in March.
REQUIRED:
Produce a statement that shows the optimal production plan and the resulting profit or loss for March.
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