Product Budgeting Markem Ltd manufactures two types of mobile phones called ‘Mega’ and ‘Rapid’ - Leaving Cert Accounting - Question 9 - 2012

To calculate the Production Budget (in units):

1. Budgeted Sales for Mega: 2,600 units

2. Add Budgeted Closing Stock for Mega: 340 units

3. Subtract Budgeted Opening Stock for Mega: 160 units

4. Production for Mega:

   $$2,600 + 340 - 160 = 2,780 ext{ units}$$

5. Budgeted Sales for Rapid: 1,200 units

6. Add Budgeted Closing Stock for Rapid: 250 units

7. Subtract Budgeted Opening Stock for Rapid: 90 units

8. Production for Rapid:

   $$1,200 + 250 - 90 = 1,360 ext{ units}$$

To calculate the Material Usage Budget:

1. For Material A (Mega):

   • Production: 2,780 units

   • Material content: 4 gms/unit

   • Total Material A needed:

   $$2,780 imes 4 = 11,120 ext{ gms}$$

2. For Material A (Rapid):

   • Production: 1,360 units

   • Material content: 2 gms/unit

   • Total Material A needed:

   $$1,360 imes 2 = 2,720 ext{ gms}$$

3. Total for Material A:

   $$11,120 + 2,720 = 13,840 ext{ gms}$$

4. For Material B (Mega):

   • Production: 2,780 units

   • Material content: 6 gms/unit

   • Total Material B needed:

   $$2,780 imes 6 = 16,680 ext{ gms}$$

5. For Material B (Rapid):

   • Production: 1,360 units

   • Material content: 3 gms/unit

   • Total Material B needed:

   $$1,360 imes 3 = 4,080 ext{ gms}$$

6. Total for Material B:

   $$16,680 + 4,080 = 20,760 ext{ gms}$$

To calculate the Materials Purchases Budget:

1. For Material A:

   • Opening Stock: 750 gms

   • Closing Stock: 830 gms

   • Budgeted Production: 13,840 gms

   $$11,120 + 750 - 830 = 13,840 ext{ gms needed}$$

2. For Material B:

   • Opening Stock: 530 gms

   • Closing Stock: 450 gms

   • Budgeted Production: 20,760 gms

   $$16,680 + 530 - 450 = 20,760 ext{ gms needed}$$

To calculate the Labour Budget:

1. Direct Labour for Mega:

   • Number of hours: 6

   • Rate per hour: €7

   • Total Labour Cost for Mega:

   $$6 imes 7 = €42$$

2. Direct Labour for Rapid:

   • Number of hours: 8

   • Rate per hour: €7

   • Total Labour Cost for Rapid:

   $$8 imes 7 = €56$$

3. Total Labour Cost:

   $$€42 + €56 = €98$$

Markem Ltd would prepare a Production Budget to determine the number of units of each product that should be produced to meet sales demands and satisfy stock requirements. This ensures that the company can efficiently align its production with forecasted sales, manage inventory levels, and ultimately optimize profitability.