Prepare a master budget and all supporting budgets

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Reference no: EM13553543

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

 

172,100

Required

Prepare a master budget and all supporting budgets.

Reference no: EM13553543

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