90.2K

Verified Solution

Link Copied!

Sturn Technology Ltd has projected sales of its product for the second of the year as shown below:

July $40$ units

August $90$ units

September $100$ units

October $80$ units

November $30$ units

December $70$ units

Other relevant information:

The product will be sold for $$100$ each. The selling and administration variable expenses will be $$15$ per unit and fixed expenses will be $$2,500$ per month.

The finished product will require $3$ units of raw material and $10$ hours of direct labour. The company pays $$20$ per hours to their workers.

It is the company policy to maintain an ending inventory of finished goods equal to the next two months of sales and an ending inventory of raw materials equal to half of the current month's usage. Each unit of material cost $$25.$

Required:

Prepare the following budgets for Sturn Technology Ltd for the months of August, September and October; and for quarter ended $31$ October.

$($a$)$ Sales budget.

$($b$)$Production budget in units.

$($c$)$Direct material purchase budget in units and in $$.$

$($d$)$Sturn Technology Ltd is currently using high$-$low method as one of the tools to predict cost. Describe, apart from the high$-$low method, two other methods that could be used by Sturn to separate the fixed and variable costs from the semi$-$variable costs. Indicate one strength and one weakness of each of the three methods $($including the high$-$low method$).$

$*$ Keep to $2$ decimal places where applicable.

Sturn Technology Ltd has projected sales of its product for the second of the year as shown below:

July $40$ units

August $90$ units

September $100$ units

October $80$ units

November $30$ units

December $70$ units

Other relevant information:

The product will be sold for $$100$ each. The selling and administration variable expenses will be $$15$ per unit and fixed expenses will be $$2,500$ per month.

The finished product will require $3$ units of raw material and $10$ hours of direct labour. The company pays $$20$ per hours to their workers.

It is the company policy to maintain an ending inventory of finished goods equal to the next two months of sales and an ending inventory of raw materials equal to half of the current month's usage. Each unit of material cost $$25.$

Required:

Prepare the following budgets for Sturn Technology Ltd for the months of August, September and October; and for quarter ended $31$ October.

$($a$)$ Sales budget.

$($b$)$Production budget in units.

$($c$)$Direct material purchase budget in units and in $$.$

$($d$)$Sturn Technology Ltd is currently using high$-$low method as one of the tools to predict cost. Describe, apart from the high$-$low method, two other methods that could be used by Sturn to separate the fixed and variable costs from the semi$-$variable costs. Indicate one strength and one weakness of each of the three methods $($including the high$-$low method$).$

$*$ Keep to $2$ decimal places where applicable.

Answer & Explanation Solved by verified expert

See Answer