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a. Hoshawaseey Ltd manufactures two products A and B and is preparing its budget for...

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a. Hoshawaseey Ltd manufactures two products A and B and is preparing its budget for 2022. Both products are made by the same grade of labour, grade W. The company currently holds 800units of A and 1,200 units of B in inventory, but 250 of these units of B have just been discovered to have deteriorated in quality, and must therefore be scrapped. Budgeted sales of A and B for 2022 are 3,000 units and 4,000 units respectively, provided the company maintains finished goods inventories at a level equal to three months' sales. Grade W labour was originally expected to produce one unit of A in two hours and one unit of B in three hours, at an hourly rate of GH2.50 per hour. In discussions with trade union negotiators, however, it has been agreed that the hourly wage rate should be raised by GH0.50 per hour provided that the times to produce A and B are reduced by 20%. Required: Prepare the production and direct labour budget for 2017. b. Distinguish between a fixed budget and flexible budget. 10mks

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