FUNCTIONAL AND CASH BUDGETS

EXAMPLE: (PRODUCTION UNITS AND RAWMATERIAL USAGE/CONSUMPTION BUDGET)

Anna, Banna and Chaana are soap manufacturing company specialized in the production and
sale of their three products.
BUDGETED SALES: Anna 16,000 Units, Baana 18,000 units, and Chaana 15,000 units
Estimates of their finished goods and raw material requirements for the last quarter of 2020
are as follows:
Finished Goods:
PRODUCTS Stock as at 1st Oct 2020 Stocks as at 31st Dec. 2020
Anna 8,000 12,000
Banna 10,000 15,000
Chaana 9,000 10,000
Raw materials
X 20,000 22,000
Y 16,000 20,000
Z 18,000 25,000
FUNCTIONAL BUDGETS (Cont.)
 (b) Raw material requirements per unit of product (or Mix.)
 PRODUCT: Raw material Raw material Raw Material
 X Y Z
 Anna 2 3 4
 Baana 1 2 3
 Chaana 2 1 2

 Purchase price per KG: X K5, Y K6 and Z K4.

 REQUIRED: Prepare:
 (a) Production Budgets (in Units)
 (b) Raw material usage or consumption budget in quantities
 (c) A Raw material purchases budget in Quantities and Value
FUNCTIONAL BUDGETS (Cont.)
 Production Budget in Units
 (of Anna, Baana & Chaana Soap Manfucaturing Co. for the period 31 December, 2020
  
 PRODUCTS G P J
 Estimated/Desired closing stock
 of finished goods 12,000 15,000 10,000
 Add Budgeted sales during year 16000 18,000 15,000
 28,000 33,000 25,000
 Less: Estimated Opening Stock
 of finished goods 8000 10,000 9000
 PRODUCTION (IN UNITS) 20,000 23,000 16,000
FUNCTIONAL BUDGETS (Cont.)
 FUNCTIONAL BUDGET (Cont,)
 Purchases Budget in Quantities
 Material X Material Y Material Z
 Estimated/Desired closing stock of
 raw material 22,000 20,000 25,000
 Add: Raw Material consumption/usage 95,000 122,000 181,000
 117,000 142,000 206,000
 Less: Opening Stock of raw Materials 20,000 16,000 18,000
 PURCHASES REQUIRED (IN QTY) 97,000 126,000 188,000
 Purchase Price Per Kg/PER unit K5 K6 K4
 PURCHASE IN VALUE (K) K485,000 756,000 752,000