Task 1

1.Sales Budget

First Quarter Sales Unit 460

Quarterly Unit Increment 40
Selling Price 2,000.00

Q1 Q2 Q3 Q4 Year

Expected Sales
(in units) 460 500 540 580 2,080
Selling price
(RM) 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
Total sales
(RM) 920,000.00 1,000,000.00 1,080,000.00 1,160,000.00 4,160,000.00

2.Production Budget
Percent of Closing Stock 15.00%

Q1 Q2 Q3 Q4 Year
Expected Sales (in units) 460 500 540 580 2,080
Add: Desired ending
Finished goods (units) 75 81 87 93
Total required units 535 581 627 673
Less: Beginning Finished
goods (units 0 75 81 87
Required Production Units 535 506 546 586 2,173
3.Direct Material Budget
Percent of Closing Stock 10.00%

DM1 (Galvanised Steel)

Direct Material Per Unit 50.000
Cost Per Unit 10.00

Q1 Q2 Q3 Q4 Year
Units to be
produced (from
production
budget) 535 506 546 586 2,173
Direct material
per unit 50.000 50.000 50.000 50.000
Total DM
required for
production
(units) 26,750 25,300 27,300 29,300 108,650
Add: Ending
DM (units) 2,530 2,730 2,930 3,130
Total DM
required (units) 29,280 28,030 30,230 32,430
Less: Beginning
DM (units) 0 2,530 2,730 2,930
Direct Material
to be purchased
(units) 29,280 25,500 27,500 29,500 111,780
Cost per unit 10.00 10.00 10.00 10.00
Total Cost of
DM purchased
(RM) 292,800.00 255,000.00 275,000.00 295,000.00 1,117,800.00
DM2 (Motor)
Direct Material Per Unit 1.000
Cost Per Unit 100.00

Q1 Q2 Q3 Q4 Year
Units to be produced
(from production
budget) 535 506 546 586 2,173
Direct material per unit 1.000 1.000 1.000 1.000
Total DM required for
production (units) 535 506 546 586 2,173
Add: Ending DM (units) 51 55 59 63
Total DM required
(units) 586 561 605 649
Less: Beginning DM
(units) 0 51 55 59
Direct Material to be
purchased (units) 586 510 550 590 2,236
Cost per unit 100.00 100.00 100.00 100.00
Total Cost of DM
purchased (RM)
58,560.00 51,000.00 55,000.00 59,000.00 223,560.00
4.Direct Labour Budget
DL1 (Machine Technician)
Direct Labour Time Per Unit 0.500
Direct Labour Cost Per Hour 10.00

Q1 Q2 Q3 Q4 Year
Units to be produced (from
production budget)
535 506 546 586 2,173
Direct labour time per unit 0.500 0.500 0.500 0.500
Total required direct
labour hours 267.500 253.000 273.000 293.000 1,086.500
Direct labour cost per
hour 10.00 10.00 10.00 10.00
Total direct labour cost
(RM) 2,675.00 2,530.00 2,730.00 2,930.00 10,865.00

DL2 (Welding Technician)

Direct Labour Time Per Unit 0.500
Direct Labour Cost Per Hour 8.00

Q1 Q2 Q3 Q4 Year

Units to be produced (from

production budget)
535 506 546 586 2,173
Direct labour time per unit
0.500 0.500 0.500 0.500
Total required direct labour
hours 267.500 253.000 273.000 293.000 1,086.500
Direct labour cost per hour
8.00 8.00 8.00 8.00
Total direct labour cost
(RM) 2,140.00 2,024.00 2,184.00 2,344.00 8,692.00
5.Factory Overhead Budget
Unit Per Month 120
Depreciation Per Month 14,750.00
Q1 Q2 Q3 Q4 Year Cost Per
Month
Variable
Cost:
VC 1 177,461.6
43,691.67 41,323.33 44,590.00 47,856.67 7 9,800.00
VC 2 120,722.1
29,722.19 28,111.08 30,333.30 32,555.52 0 6,666.66
VC 3 1,337.50 1,265.00 1,365.00 1,465.00 5,432.50 300.00
VC 4 1,188.86 1,124.42 1,213.30 1,302.19 4,828.77 266.66
VC 5 0.00 0.00 0.00 0.00 0.00 0.00
VC 6 0.00 0.00 0.00 0.00 0.00 0.00
Total
Variable 71,823.8 77,501.6 83,179.3 308,445. 17,033.
Cost (RM) 75,940.22 3 1 8 04 32
Fixed
Cost:
FC 1 2,666.64 2,666.64 2,666.64 2,666.64 10,666.56 888.88
FC 2 120,000.0 10,000.0
30,000.00 30,000.00 30,000.00 30,000.00 0 0
FC 3 4,080.00 4,080.00 4,080.00 4,080.00 16,320.00 1,360.00
FC 4 101,700.0 101,700.0 101,700.0 406,800.0 33,900.0
101,700.00 0 0 0 0 0
FC 5 0.00 0.00 0.00 0.00 0.00 0.00
Depreciation 177,000.0
44,250.00 44,250.00 44,250.00 44,250.00 0
Total
Fixed
Cost 182,696.6 182,696. 182,696. 182,696. 730,786. 46,148.
(RM) 4 64 64 64 56 88
Total
Factory
Overhead 254,520.4 260,198.2 265,876.0 1,039,231.
(RM) 258,636.86 7 5 2 60
Total
Direct
Labour
Hours 535.000 506.000 546.000 586.000 2,173.000
Factory
overhead
rate per
direct
labor
hours
(OAR) 478.247
6.Closing Stock Budget
Units Unit Cost (RM) Total Value
(RM)
Direct materials:
 DM1 3,130 10.00 31,300.00
 DM2 63 100.00 6,260.00
Total DM Stock 37,560.00
Finished Goods:
 Product X 93 1,087.25 101,114.01
Total Closing Stock 138,674.01

Unit Cost (RM) Unit Value (RM)

DM1 10.00 50.000 500.00
DM2 100.00 1.000 100.00
DL1 10.00 0.500 5.00
DL2 8.00 0.500 4.00
Factory Overhead 478.247 1.000 478.25
Unit Cost 1,087.25
7.Cost of Goods Sold Budget
Direct Material 1 Used
1,086,500.00
Direct Material 2 Used
217,300.00
Direct Labour
19,557.00
Factory Overhead
1,039,231.60
Total Production Cost
2,362,588.60
Add: Beginning FG
0.00
Less: Ending FG
101,114.01 -101,114.01
Cost of Goods Sold
2,261,474.59
8.Selling and Administrative Budget
Unit Per Month 460
Depreciation Per Month (Selling) 0.00
Depreciation Per Month (Admin) 250.00

Q1 Q2 Q3 Q4 Year Cost Per

Month
Selling Expenses:
Variable Cost
VC1 0.00 0.00 0.00 0.00 0.00 0.00
VC2 0.00 0.00 0.00 0.00 0.00 0.00
VC3 0.00 0.00 0.00 0.00 0.00 0.00
VC4 0.00 0.00 0.00 0.00 0.00 0.00
VC5 0.00 0.00 0.00 0.00 0.00 0.00
VC6 0.00 0.00 0.00 0.00 0.00 0.00
Fixed Cost
FC1 9,000.00 9,000.00 9,000.00 9,000.00 36,000.00 3,000.00
FC2 0.00 0.00 0.00 0.00 0.00 0.00
FC3 0.00 0.00 0.00 0.00 0.00 0.00
FC4 0.00 0.00 0.00 0.00 0.00 0.00
FC5 0.00 0.00 0.00 0.00 0.00 0.00
Depreciation 0.00 0.00 0.00 0.00 0.00
Total Selling
Expenses 9,000.00 9,000.00 9,000.00 9,000.00 36,000.00
Administrative
Expenses:
Variable Cost
VC1 232.61 220.00 237.39 254.78 944.78 200.00
VC2 969.20 916.66 989.13 1,061.59 3,936.58 833.33
VC3 38.76 36.66 39.56 42.46 157.45 33.33
VC4 0.00 0.00 0.00 0.00 0.00 0.00
VC5 0.00 0.00 0.00 0.00 0.00 0.00
VC6 0.00 0.00 0.00 0.00 0.00 0.00
Fixed Cost
FC1 4,500.00 4,500.00 4,500.00 4,500.00 18,000.00 1,500.00
FC2 333.33 333.33 333.33 333.33 1,333.32 111.11
FC3 0.00 0.00 0.00 0.00 0.00 0.00
FC4 0.00 0.00 0.00 0.00 0.00 0.00
FC5 0.00 0.00 0.00 0.00 0.00 0.00
Depreciation 750.00 750.00 750.00 750.00 3,000.00
TotalAdministration 6,823.90 6,756.66 6,849.41 6,942.16 27,372.13
Total Selling &
Administrative
expenses 15,823.90 15,756.66 15,849.41 15,942.16 63,372.13
9.Budget Profit and Lose
Corporate Tax
Q1 Q2 Q3 Q4 Year
Tax(es)
7.50% 7.50% 7.50% 7.50% 30.00%

Sales
4,160,000.00
Less: Cost of Goods Sold
2,261,474.59
Budgeted Gross Profit
1,898,525.41
Less: Selling & Admin. Expenses
63,372.13
Budgeted Net Profit
1,835,153.28
Provision for tax (….%)
550,545.98
Retained Profit
1,284,607.30
10. Cash Budget for each four quarter of 2017
Expected Cash Collection
% of Cash Collected in Quarter Sold 50.00%
% of Cash Collected in following Quarter 50.00%

Q1 Q2 Q3 Q4
Q1 Sales 920,000.00 460,000.00 460,000.00
Q2 Sales 1,000,000.00 500,000.00 500,000.00
Q3 Sales 1,080,000.00 540,000.00 540,000.00
Q4 Sales 1,160,000.00 580,000.00
Total
Cash
Collection 460,000.00 960,000.00 1,040,000.00 1,120,000.00

Expected Payment of Direct Material

% of Paid in Quarter Purchased 70.00%
% of Paid in following Quarter 30.00%

Q1 Q2 Q3 Q4
Q1 DM1 Purchase 292,800.00 204,960.00 87,840.00
Q1 DM2 Purchase 58,560.00 40,992.00 17,568.00
Q2 DM1 Purchase 255,000.00 178,500.00 76,500.00
Q2 DM2 Purchase 51,000.00 35,700.00 15,300.00
Q3 DM1 Purchase 275,000.00 192,500.00 82,500.00
Q3 DM2 Purchase 55,000.00 38,500.00 16,500.00
Q4 DM1 Purchase 295,000.00 206,500.00
Q4 DM2 Purchase 59,000.00 41,300.00
Total Cash
Payments 245,952.00 319,608.00 322,800.00 346,800.00
Cash Budget
Number of Group Member 5
Common Share from Each Group Member 2,000.00
Opening Cash Balance 100,000.00

Q1 Q2 Q3 Q4 Year
Receipts:
Collection from
customer 460,000.00 960,000.00 1,040,000.00 1,120,000.00 3,580,000.00
Common Share 10,000.00 0.00 0.00 0.00 10,000.00
Total Receipts 470,000.00 960,000.00 1,040,000.00 1,120,000.00 3,590,000.00
Payments:
Direct Material 245,952.00 319,608.00 322,800.00 346,800.00 1,235,160.00
Direct Labour 4,815.00 4,554.00 4,914.00 5,274.00 19,557.00
Factory Overhead 214,386.86 210,270.47 215,948.25 221,626.02 862,231.60
Selling &
Administrative 15,073.90 15,006.66 15,099.41 15,192.16 60,372.13
Income Tax 137,636.50 137,636.50 137,636.50 137,636.50 550,545.98
Payment Fixed Asset 0.00 0.00 0.00 0.00 0.00
Total payments 617,864.26 687,075.62 696,398.15 726,528.68 2,727,866.71
Surplus/Deficit -
147,864.26 272,924.38 343,601.85 393,471.32 862,133.29
Opening Balance 100,000.00 -47,864.26 225,060.12 568,661.97 100,000.00
Closing Balance -47,864.26 225,060.12 568,661.97 962,133.29 962,133.29
Task 2
1. Most of the cash balance in the year 2017 is above RM200,000 except for Quarter 1.

The cash flow in Quarter 1 is in negative which is RM - 47,864.26. There are a few

potential problems related to this negative cash flow, but most significant problem

occurred in the cash payment for Direct Material. In Quarter 1, the Direct Material’s

cash payment consume majority of the cash receipts with an amount of RM 245,952

but this is a typical cash flow for a business that manufactures and sells products.

Precaution and extra attention need to be given for Quarter 1 because it is the first

quarter of the year and normally the cash receipts from customer’s collection is low,

thus with a high amount of direct material’s cash payment then resulting the cash flow

to be in negative. This condition does not comprehend with the aim of the cash

management, “Cash Received into the business is must exceeds cash disbursed out of

the business”.

2. The possible simplest and commonly known solution for the company to improve its’

management of cash flow is by using trade credit. Trade Credit is a financial

agreement between a supplier and trade customer whereby the supplier agrees to

provide materials up front with payment to come later. In an agreement, usually the

supplier and the buyer agreed to pay within 10 days with a 2 percent discount or

within 30 days without any discount, hence the buyer must optimize the cash use

within those 30 days. This method offers many advantages to the buyer such as not

having to pay up front, by which enables the company to use its’ cash for other capital

needs. By delaying the cash payment for Direct Material, the value of cash balance will

be distinctly improved hence able to have a minimum cash balance of RM 200,000.

3. In order to improve the production process while having excess money, the company

should implement new supervisors from foreign modern country in contemplation of

assisting the production team to achieve an international production standard. The

production team have to learn the working ethics from other modern country to such

a degree that they will adopt their thinking and working. The production process will

significantly improve, concurrently the company also will be recognised

internationally.
Task 3: Variance Analysis
Question 1

 Material Price Variance for DM1 (Galvanised Steel)

Galvanised Steel Price Variance = (Actual Price – Standard Price) x Actual Quantity

Find Actual Quantity;

Actual Quantity = Standard Quantity – (8% x Standard Quantity)
While Standard Quantity = 111,780
Thus, Actual Quantity = 111,780 – (8% x 111,780)
= 102,837.60
Find Actual Price;
Actual Price = Standard Price – (8% x Standard Price)
While Standard Price = 10.00
Thus, Actual Price = 10.00 – (8% x 10.00)
= 9.20
Hence,
Galvanised Steel Price Variance = (9.20 – 10.00) x 102,837.60

= RM 82,270.08

 Material Usage Variance for DM2 (Motor)

Motor Usage Variance = (Actual Quantity Used – Standard Quantity Used) x

Standard Price

Find Actual Quantity Used;

Actual Quantity Used = Standard Quantity Used + (8% x Standard Quantity Used)
Standard Quantity Used = 2,173
Thus, Actual Quantity Used = 2173 + (8% x 2173)
= 2,346.84

Hence,
Motor Usage Variance = (2,346.84 – 2,173) x 10.00
= RM 1,738.40
 Labour Rate Variance for DL1 (Machine Technician)

Machine Technician Labour Rate Variance = (Actual Rate–Standard Rate) x Actual Hour

Find Actual Rate = Standard Rate + (Standard Rate x 8%)

While, Standard Rate = 10.00
Thus, Actual Rate = 10.00 + (10.00 x 8%)
= 10.80

Find Actual Hour = Standard Hour – (Standard Hour x 8%)

While, Standard Hour = 1,086.50
Thus, Actual Hour = 1,086.50– (1,086.50 x 8%)
= 999.58

Hence,
Machine Technician Labour Rate Variance = (10.80 – 10.00) x 999.58
= RM 799.66

 Labour Efficiency Variance for DL2 (Welding Technician)

Welding Technician Labour Efficiency Variance = (Actual Hour – Standard Hour)xStandard Rate

Find Actual Hour = Standard Hour – (Standard Hour x 8%)

Standard Hour = 1,086.50
Thus, Actual Hour = 1,086.50 – (1,086.50 x 8%)
= 999.58
Standard Rate = 8.00

Hence,
Welding Technician Labour Efficiency Variance = (999.58 – 1,086.50) x 8
= RM 695.36
2.

Variances Determine Explain

Galvanised Steel (DM1) Favourable The company pay less for direct
Material Variance material than expected.

Motor (DM2) Adverse The company used more for

Usage Variance direct material which is the
motor than expected.
Machine Technician (DL1) Adverse The company paid more per hour
Labour Rate Variance for direct labour than it expected.

Welding Technician (DL2) Favourable The output produced by the

Labour Efficiency Variance company is more than expected
in the same number of hour
worked.
Task 4

1. Value of Galvanised Steel (DM1) price variance is caused due to the decline price of

Galvanised Steel and also the decline usage and purchased of Galvanised steel than

what have been budgeted. Both are reduced by a percentage of 8%. As a result, this

will impact the company to pay less for Galvanised Steel, hence making it a favourable

variance.

Value of Welding Technician (DL2) efficiency variance is caused due to the reduction

of working hour by 8%, it can be understood that if the working hour is reduced but

the output product remains the same, thus it can be said that the worker is more

energetic, motivated or the quality of equipment used is better. In other words, the

actual output is in excess of standard output set for same number of hours. Hence,

the variance is favourable.

2. The recommendation to improve Galvanised Steel (DM1) price variance is by re-

budgeting the price for Galvanised Steel. This will allow the company to save money

and able to invest capital in other places. The price variance can also be reformed by

re-estimate the material used and purchased. This will act as a medium for the

company to avoid poor management of the company and can focus on other more

important thing.

The recommendation to improve Welding Technician (DL2) efficiency variance is by

re-allocating the work hour needed to complete the product. Management has to play

an important role to ensure the allocation of work hour is directly proportional to the

time needed to complete the product.