Preparing Budgets

Corn Flakes Yearly sales 45,000 boxes with quarterly breakup in the following ratio
Price Rs350 per Box
1st Quarter Sales 16%
2nd Quarter Sales 28%
3rd Quarter Sales 30%
4th Quarter sales 26%

Baby Corn Yearly sales 60,000 Tins with quarterly breakup in the following ratio
Price Rs 125 per Tin
1st Quarter Sales 27%
2nd Quarter Sales 25%
3rd Quarter Sales 23%
4th Quarter sales 25%

Corn Flakes (Finished Inventory Policy)

Year’s Beginning Inventory 25% of current quarter’s sales
Ist Quarter ending Inv 40% of current quarter’s sales
2nd Quarter ending Inv 40% of current quarter’s sales
3rd Quarter ending Inv 35% of current quarter’s sales
4th Quarter ending Inv 1.1 times the beginning inventory of the year

Baby Corn (Finished Inventory Policy)

Year’s Beginning Inventory 30% of current quarter’s sales
Ist Quarter ending Inv 30% of current quarter’s sales
2nd Quarter ending Inv 25% of current quarter’s sales
3rd Quarter ending inv 30% of current quarter’s sales
4th Quarter ending inv 1.1 times the beginning inventory of the year

Corn Flakes (Materials Inventory Policy)

Year’s Beginning Inventory 25% of current qtr’s mat. required for production
Ist Quarter ending Inv 40% of current qtr’s mat. required for production
2nd quarter ending Inv 40% of current qtr’s mat. required for production
3rd Quarter ending Inv 35% of current qtr’s mat. required for production
4th Quarter ending Inv 1.1 times the beginning inventory of the year

Baby Corn (Materials Inventory Policy)

Beginning Inventory 30% of current qtr’s mat. required for production
Ist Quarter ending Inv 30% of current qtr’s mat. required for production
2nd Quarter ending inv 25% of current qtr’s mat. required for production
3rd Quarter ending Inv 30% of current qtr’s mat. required for production
4th Quarter ending Inv 1.1 times the beginning inventory of the year

Direct Material
Corn Flakes 3 kg to produce one unit @ Rs 17/ Kg
Baby Corn 5 kg to produce one unit @ Rs 25/ Kg
Direct Labour Details
Corn Flakes - Direct Labour Hour 4 DLH per unit paid @ Rs30 per DLH
Baby Corn - Direct Labour Hour 2DLH per unit paid @ Rs15 per DLH
 Manufacturing Overhead budget Rates
Indirect labour 0.20
Indirect Material 0.10
Employee Benefits 1.00
Utilities 1.20
Total Rs 2.50

Cost driver is Direct labour hours

Fixed Costs for Each Quarter

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total
Supervision 35,000 35,000 35,000 35,000 140,000

Property Tax 12,000 12,000 12,000 12,000 48,000

Insurance 18,000 18,000 18,000 18,000 72,000

Maintenace 20,500 20,500 20,500 20,500 82,000

Utilities 15,000 15,000 15,000 15,000 60,000

Depreciation 24,000 24,000 24,000 24,000 96,000

Others 3,000 3,000 3,000 3,000 12,000

127,500 127,500 127,500 127,500 510,000

Receivables Policy
 55% of sales in the same quarter
 25% in next quarter
 Balance amount quarter subsequent to next quarter
 Amount of sales made in 3rd quarter of last year was Rs6.3 millions
 Amount of sales made in 4th quarter of last year was Rs5.650 millions
Payables Policy
 60% of purchases in the same quarter
 40% in next quarter
 Overheads, selling and administration expenses are paid in the same month these are incurred
 Amount of purchases made in 4th quarter of last year was Rs2.4 millions
Other Details
 Opening balance Cash Rs1.275 million
 Fixed selling expenses are Rs700,000 per quarter and administrative expenses are Rs630,000 per quarter
 Company pays commission to its sales person at the rate of 2% for each quarters’ sales.
 Each of first three quarter company pays Rs150,000 as tax. In last quarter it pays the balance of Rs.500,000
 Each quarter company earns income from other sources amounting to Rs.1.5 million per quarter.
 Capex Rs 2 million in 4th quarter, paid

Prepare all the yearly budgets showing quarter-wise details