Reference no: EM132634514

Question 1: Budgets are an integral part of management control systems. Evaluate this statement with real life example.

Question 2:

Xavier Sound Industries manufactures and sells two models of headphones, Regular and Classic. It expects to sell 6,000 units of Regular and 2,000 units of Classic in 2021.The following estimates are given for 2021:

                         Regular            Classic

Selling price Rs. 1000           Rs. 1500

• Xavier had an inventory of 400 units of Regular and 150 units of Classic at the end of 2020. It has decided that as a measure to counter stock outages it will maintain ending inventory of 700 units of Regular and 400 units of Classic.
• Each headphone requires 5 units of material- C, and 6 units of Material-D. Both have to be imported at a cost of Rs. 20 per unit. There were 1000 units of material- C, and 1200 units of material- D in stock at the end of 2020.The management does not want to have any stock of both materials at the end of 2021.
• It requires 30 minutes of direct labor time to produce Regular and 45 minutes Classic, direct labor cost is Rs. 500 per hour.
• Variable overhead costs Rs. 55 per direct labor hour. Fixed overhead costs Rs. 300,000 per year.

You are required to apply fixed budgeting knowledge and answer the following with respect of 2021:

I. Sales budget

II. Production budget

III. Direct material purchase budget

IV. Direct labor cost budget

V. Factory overhead budget

VI. Manufacturing cost budget