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The Garden Ornament Company manufactures two types of garden ornament: a duck and a heron. The information presented in Tables T1 to T5 has been prepared, as a result of discussions by line managers, for the purposes of preparing a master budget for Year 6.
Sales and production volumes and direct costs
(T1)
Ducks
Herons
Unit sales for the year
8,000
15,000
£
Unit selling price
30
45
Unit variable cost:
Direct material
14
16
Direct labour
12
13
Direct labour costs are based on an average cost of £15,000 per person per year.
Other costs
(T2)
Production heat and light
£8,000 for the year
Production fixed overheads
£4,000 for the year
Partners' salaries
£55,000 for the year
Rent of premises
£11,000 for the year
Office staff salaries
£48,450 for the year
Marketing and distribution
18 per cent of sales
Working capital targets
(T3)
Debtors at end of year
Half of one month's sales.
Trade creditors for materials
One month's purchases.
Stock of raw materials
Enough for 60 per cent of next month's production.
Stock of finished goods
No stock held, as goods are made to order and delivered to the customer on completion.
Sales and purchases are planned to be spread evenly over the year.
Capital budget plans
(T4)
Purchase one new moulding machine at £70,000, at the start of the year.
Depreciate all machinery for a full year at 20% per annum on a straight-line basis.
Balance sheet at 31 December Year 5
(T5)
Equipment at cost
190,000
Accumulated depreciation
40,000
Net book value
150,000
Stock of raw materials:
For 400 ducks @ £14 each
5,600
For 750 herons @ £16 each
12,000
Trade debtors
32,000
Cash
2,500
52,100
Trade creditors
30,000
22,100
172,100
Partners' capital
Required
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