PYE Ltd produces a popular product called P.

The Co is interested in presenting its budget for the second

qtr of 2022. The following information are made available for this purpose:

(a) Expected sales is 50,000 units of P during the second qtr of 2022 at a selling price of ₹ 9 per
unit.
(b) Each Unit of P requires 2.5 kgs of a raw-material called Q and 7.5 kgs of another raw-material
called R.
(c) Stock levels planned are as under:

Particulars Qtr beginning Qtr End

Finished Units of P (Units) 15,000 11,000
Raw-Material Q (Kgs) 32,000 26,000
Raw-Material R (Kgs) 57,000 47,000
Packing box (Nos.) 37,000 28,000
(d) Q costs ₹ 1.20 per kg; R costs 20 paise per kg and Packing box costs 80 paise each.
(e) It requires 9 minutes of direct labour time to produce and pack one unit of P. Labour cost is ₹ 5
per hour.
(f) Variable manufacturing costs are ₹ 0.45 per unit. Fixed manufacturing costs ₹ 30,000 per Qtr.
(g) Variable selling and administration expenses are 5% of sales and fixed administration and selling
expenses are ₹ 25,000 per Qtr.

You are required to :

(i) Prepare a Production Budget for the said Qtr; (ii) Prepare a Raw-materials Purchase Budget for Q, R
and Packing Boxes for the said Qtr in Qty as well as in monetary value; (iii) Compute the budgeted
variable cost to produce one box of P; and (iv) Prepare a statement of budgeted net income for the said
Qtr and show both per unit and total cost data.

X Ltd produces and markets three products – Chairs, Tables and Benches. The Company is interested in
presenting its budget for the next quarter ending 31 st Match 2023. It expects to sell 4,200 Chairs, 800
Tables and 500 Benches during the said period at the Selling Price of ₹ 50, ₹ 85 and ₹ 158 per unit
respectively. The following information are made available for the purpose:
(i) Material and Labour requirements
Particulars Chairs Tables Benches
Timber per unit In cubic feet 0.5 1.2 2.5
Upholstery per unit In Sq. Yds. 0.25 - -
Carpenter’s Time Mins per unit 45 60 75
Fixer and Finisher’s Time Mins per unit 15 15 30

Timber Costs ₹ 50 per Cu.ft and Upholstery costs ₹ 20 per sq.yd. Fixing and finishing materials cost 5%
of the cost of Timber and Upholstery. Carpenter gets ₹ 6 per hour while the Fixer and Finisher gets ₹
4.80 per hour.
(ii) Inventory levels Planned
Particulars Timber (cu.ft) Upholstery(sq.yd) Chairs (Nos) Tables (Nos) Benches (Nos)
Opening 600 400 400 100 50
Closing 650 260 200 300 50
(iii) Fixed Overheads would be ₹ 8,000 per month

You are required to prepare Production Budget, Purchase Budget of Raw materials (Qty as well as
Value), Direct Wages Budget. You are also required to present a statement showing variable cost of
manufacture per unit of all the three products and find out the budgeted net income for the said qtr.
Revision of Budget
Vinayak Ltd manufactures Electrical equipments and has set the following budget for 2022:
Particulars Immersion Table Lamps Bread Toasters Room Heaters
Heaters
Production Units 40,000 10,000 50,000 30,000
SP per unit ₹ 30 50 60 80
Cost per unit
Dir Materials ₹ 6 13.50 10.50 24
Dir Labour ₹ 7.50 10 18 24
Variable Overheads ₹ 4.50 10 12 13
Fixed Overheads ₹ 7.50 10 18 24
Profit/ Loss ₹ 4.50 6.50 1.50 (5.00)

When the budget was placed before the Budget Committee, the Marketing Manager put up a proposal
to increase the sales by 20,000 additional units for which capacity existed. The additional 20,000 units
could be one product or any combination of products. The proposal was accepted by the committee.
The Committee also decided that the production capacity for the next year ie.e., 2023 would be set in
such a way that there would be a further increase in the output by 50,000 units over and above the
increase of 20,000 units envisaged for 2022. The additional production of 50,000 units would be table
lamps only for which a new plant would be acquired. The additional fixed expenses of the new plant
were estimated at ₹ 70,000 per annum. During 2023, the material and labour costs were expected to
increase by 10% but the other costs and selling price would remain the same.
Required:
(a) Set a budget for 2022 in such a way that the additional capacity of 20,000 units is utilized to
maximize the profits.
(b) Set a budget for 2023.
(c) Assuming that the increased output may not filly materialize, calculate the number of units of
table lamps required to be sold in 2023 at the given price in order to ensure that profitability at
least at 2022 level is maintained.