3. Super Kitchen Limited uses five grams of PVC are need for each lunch box...
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Accounting
3. Super Kitchen Limited uses five grams of PVC are need for each lunch box bag. The cost of PVC is $4.5 per gram. Budgeted production of the lunch box bags is given below by quarters for Year 2 and for the first quarter of Year 3: Year 2 First Second Third Fourth 80,000 120,000 140,000 160,000 Year 3 First 150,000 Budgeted production in bags PVC is a usual raw material and it is better to stock up some inventories as a safety against stock-outs. So, inventory of PVC at the end of a quarter must be equal to 20% of the following quarter's production needs. Certain 110,000 grams of PVC will be on hand to start the first quarter of Year 2. Required: a) Prepare a full direct materials budget for PVC by quarters and in total, (10 marks) for Year 2 with 9 rows up to Cost of raw materials to be purchased. b) Discuss the importance of budgeting in an organization. (8 marks)
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