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    Caselet: David LTD - Budgeting-Preparation of Master Budget

    Uploaded by

    Shubham Aggarwal
    1. David Ltd manufactures 3 sub-assemblies (P, Q, R) in a ratio of 1:2:4 and is preparing budgets for July 2017. 2. The document provides information on component requirements, labor hours, wages, overheads, and opening stock quantities for sub-assemblies and components. 3. Students are asked to prepare budgets for sales, production, material usage, material purchases, and manpower using the information and targeting a 10% reduction in closing stock over opening stock to meet the company's $12 million profit goal.

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    Caselet: David LTD - Budgeting-Preparation of Master Budget

    Uploaded by

    Shubham Aggarwal
    529 views2 pages
    1. David Ltd manufactures 3 sub-assemblies (P, Q, R) in a ratio of 1:2:4 and is preparing budgets for July 2017. 2. The document provides information on component requirements, labor hours, wages, overheads, and opening stock quantities for sub-assemblies and components. 3. Students are asked to prepare budgets for sales, production, material usage, material purchases, and manpower using the information and targeting a 10% reduction in closing stock over opening stock to meet the company's $12 million profit goal.

    Original Title

    David -Budgeting (1)

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    1. David Ltd manufactures 3 sub-assemblies (P, Q, R) in a ratio of 1:2:4 and is preparing budgets for July 2017. 2. The document provides information on component requirements, labor hours, wages, overheads, and opening stock quantities for sub-assemblies and components. 3. Students are asked to prepare budgets for sales, production, material usage, material purchases, and manpower using the information and targeting a 10% reduction in closing stock over opening stock to meet the company's $12 million profit goal.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    529 views2 pages

    Caselet: David LTD - Budgeting-Preparation of Master Budget

    Uploaded by

    Shubham Aggarwal
    1. David Ltd manufactures 3 sub-assemblies (P, Q, R) in a ratio of 1:2:4 and is preparing budgets for July 2017. 2. The document provides information on component requirements, labor hours, wages, overheads, and opening stock quantities for sub-assemblies and components. 3. Students are asked to prepare budgets for sales, production, material usage, material purchases, and manpower using the information and targeting a 10% reduction in closing stock over opening stock to meet the company's $12 million profit goal.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    1.

    Caselet : David Ltd -Budgeting- Preparation of Master budget

    David Ltd. has specialised in the manufacture of three kinds of sub-assemblies required by
    the manufacturers of certain equipment. The current pattern of sales of sub-assemblies is
    in the ratio of 1:2:4 for sub-assemblies P, Q and R respectively.

    The sub-assemblies consist of the following components:

    Sub-assembly Requirement of components

    Price ($) Frame Part X Part Y Part Z

    P 430 1 10 2 8

    Q 500 1 2 14 10

    R 600 1 6 10 2

    Purchase Price ($) 40 16 10 6

    The direct labour hours required for the manufacture of each of the sub-
    assemblies are:

    Sub-assembly Skilled hours Un-skilled hours

    P 4 4

    Q 3 4

    R 3 6

    Wage rate per hour ($) 6 5

    The labourers work for 8 hours a day for 25 days a month.

    Variable overheads per sub-assembly are P $10, Q $8, R $7.

    The estimates of ‘opening stocks of sub-assemblies and components for the


    month of July 2017 are as under:

    Sub-assemblies Components

    P 600 Frames 2000

    Q 1400 Part X 800

    R 3200 Y 20000
    Z 8000

    Fixed overheads budget per month is as under:


    $

    Production 15,80,000

    Selling & Distribution 7,28,000

    Administration 6,76,000

    All fixed overheads are incurred evenly throughout the year.

    The target of profit for the current year is $12 million before tax. The company
    has a plan to reduce the closing stock of sub-assemblies and components by 10% as
    compared to the opening stock.

    Assignment Questions:

    Required

    Prepare the following budgets for the July 2017:

    i) Sales in quantities and value

    ii) Production in quantities

    iii) Material usage

    iv) Material purchase in quantities and value

    v) Manpower budget for both categories of labour including wages


    payable.

    Learning Outcome:

    1) To understand the interlinkage of the different Budgets in the


    organisation
    2) To prepare Budget keeping in mind the targeted profit of the organisation

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