REQUIREMENT 1

HYPOTHETICAL DATA ASSUMPTION

Company Name: Super Glass Bangles LLP.
Selling Price per unit: Rs 50 per unit
No of units sold: 100,000 units
Total sales Revenue: Rs 5,000,000
Direct Raw Material:
Direct Material Needed per pound: 1.5 Kg per unit
Total Number of Units: 100,000
Price per Kg: Rs 10
Total Amount: Rs 1,000,000
Direct Labor:
Direct Labor Needed per unit: 0.05 hour
Total Number of Hours: 5000 Hours
Price per hour: Rs 240 per hour
Total Direct Labor needed: Rs 1,200,000
Manufacturing Overhead Cost Schedule:
Variable overhead: Rs 172 per hour
Fixed Manufacturing Overhead: Rs 1,000,000
Depreciation expenses: Rs 50,000

Non- Manufacturing Expense:

Selling Expense variable: Rs 5 per unit
Fixed Selling Expense: Rs 500,000
Fixed administrative expense: Rs 300,000
 Requirement 2

Production Department: Cost

Furnace Expense Rs 1,000,000

Cutting Expense Rs 150,000

Administrative Department:

Supervisor salary Rs 60,000

Administration department salary Rs 100,000
Marketing Department:
Selling commission (Rs 5 per unit) Rs 500,000
Marketing Dept base salary Rs 50,000

ACTIVITY COST POOL

Activities Customer Product design Order size Customer Other Total
order relation
Furnace 10% 60% 20% 10% 0% 100%
Cutting 20% 50% 15% 10% 5% 100%
Supervisor salary 25% 25% 30% 20% 0% 100%

Administrative 30% 20% 10% 40% 0% 100%

salary
Selling commission 20% 0% 10% 70% 0% 100%

Salaries 40% 0% 0% 60% 0% 100%

 ASSIGNING COST USING ABC COSTING
Activities Shipping Cost Production Utilities Customer Other Total
department relation

Furnace Rs 100,000 Rs 600,000 Rs 200,000 Rs 100,000 Rs 0 Rs 1,000,000

Cutting Rs 30,000 Rs 75,000 Rs 22500 Rs 15000 Rs 7500 Rs 150,000

Supervisor salary Rs 15,000 Rs 15,000 Rs 18000 Rs 12000 Rs 0 Rs 60,000

Administrative salary Rs 30,000 Rs 20,000 Rs 10,000 Rs 40,000 Rs 0 Rs 100,000

Commission Rs 100,000 Rs 0 Rs 50,000 Rs 350,000 Rs 0 Rs 500,000

Salaries Rs 20,000 Rs 0 Rs 0 Rs 30,000 Rs 0 Rs 50,000

Total Rs 295,000 Rs 710,000 Rs 300,500 Rs 547,000 Rs 7500 Rs 1,860,000

ACTIVITY COST RATE CALCULATION

Cost Activity Rate
Shipping cost Rs 295000 1000 order Rs 295
Production department Rs 710,000 100,000 units Rs 7.1
Customer relation Rs 300500 100 customers Rs 3005

WHY, ABC Costing?

ABC costing system as name suggest is based on different activities which was done in company. This
costing system allow manager to get the true value of manufacturing overhead with true allocation
base. Hence provide the clearest possible information regarding manufacturing overhead of
company. The thing which differentiate it is it includes non-manufacturing expense also which also
provide the possible influence of non-manufacturing expense on manufacturing of product.
Requirement 3
 MASTER BUDGET PREPARATION
SALES BUDGET
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
Sales Unit 100,000 units 120,000 90,000 units 110,000 units 420,000
Selling price 50 50 50 50 50
Sales revenue 5,000,000 6,000,000 4,500,000 5,500,000 21,000,000

Expected Cash Budget

Company policies:
25% of sales are cash and other are on account80% of Account receivable is
collected in the quarter of sale
1st quarter 2nd quarter 3rd quarter 4th quarter Total
Beginning A/R Rs 1,000,000
Cash (25%) Rs 1,250,000
A/R collection Rs 3,000,000
Rs 5,250,000
Beginning A/R Rs 750,000
Cash (25%) Rs 1,500,000
A/R collection Rs 3,600,000
Rs 5,850,000
Beginning A/R Rs 900,000
Cash (25%) Rs 1,125,000
A/R collection Rs 2,700,000
Rs 4,750,000
Beginning A/R Rs 675,000
Cash (25%) Rs 1,375,000
A/R collection Rs 3,300,000
Rs 5,350,000

Total Rs 5,250,000 Rs 5,850,000 Rs 4,750,000 Rs 5,350,000 Rs 21,200,000

15% of Account receivable is collected in following month
Beginning account receivable is Rs 1,000,000

EXPECTED CASH INFLOWS SHEDULE

Production Budget
 Company policy:
The management decide ending inventory to 10% of following month sales in unit
On December 31, 20,000 units are on hand
Ending inventory on 4th quarter 10,000

1st quarter 2nd quarter 3rd quarter 4th quarter

Budgeted sales 100,000 120,000 90,000 110,000
Add: desired ending inventory 12,000 9,000 11,000 10,000
Total Needs 112,000 129,000 101,000 120,000
Less: Beginning Inventory 20,000 12,000 9,000 11,000
Required Production 92,000 117,000 92,000 109,000

DIRECT MATERIAL BUDGET

Company policy:
 Desired ending inventory is 20 % of the following month
 Beginning inventory is 25,000 kg
 Desired ending inventory of 4th quarter is 20,000 kg
DIRECT MATERIAL BUDGET
1st quarter 2nd quarter 3rd quarter 4th quarter Total
Production 92,000 117,000 92,000 109,000 410,000
Material per unit 1.5 kg 1.5 kg 1.5 kg 1.5 kg 1.5 kg
Production need 138,000 kg 175,500 kg 138,000 kg 163,500 kg 615,000 kg
Add: desire ending inventory 35,100 kg 27,600 kg 32,700 kg 20,000 kg 20,000 kg
Total needs 173,100 kg 203,100 kg 170,700 kg 183,500 kg 635,000 kg
Less: beginning inventory 25,000 kg 35,100 kg 27,600 kg 32,700 kg 25,000 kg
Material To be purchased 148,100 kg Rs 168,000 kg 143,100 kg 150,800 kg 610,000 kg
Unit price per kg Rs 10 Rs 10 Rs 10 Rs 10 Rs 10
Total Amount Rs 1,481,000 Rs 1,680,000 Rs 1,431,000 Rs 1,508,000 6,100,000

DIRECT LABOR BUDGET

Company Policy:
 There are no guaranteed labor hours
Per unit direct labor is 0.05 per unit
Per unit direct labor hour is Rs 240 per hour
Direct Labor Schedule
1st quarter 2nd quarter 3rd quarter 4th quarter Yearly
Unit of 92,000 117,000 92,000 109,000 410,000
production
DLH per unit 0.05 0.05 0.05 0.05 0.05
Total DLH 4600 5850 4600 5450 20500
DLH per unit 240 240 240 240 240
Total amount Rs 1,104,000 Rs 1,404,000 Rs 1,104,000 Rs 1,308,000 Rs 4,920,000

MANUFACTURING OVERHEAD BUDGET

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total

Budgeted DLH 4600 5850 4600 5450 20500

Variable MOH rate 172 172 172 172 172

Total Variable Rs 791200 Rs 1,006,200 Rs 791,200 Rs 937,400 3,526,000

Fixed MOH Rs 1,000,000 Rs 1,000,000 Rs 1,000,000 Rs 1,000,000 Rs 4,000,000

Less: Non-Cash MOH Rs 50,000 Rs 50,000 Rs 50,000 Rs 50,000 Rs 200,000

Net Cash outflow Rs 1,741,200 Rs 1,956,2000 Rs 1,741,200 Rs 1,887,400 Rs 7,326,000

 Selling and Administrative Budget
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total

Budgeted Unit 92,000 117,000 92,000 109,000 410,000

Selling variable Rs 5 Rs 5 Rs 5 Rs 5 Rs 5

Fixed selling expense Rs 500,000 Rs 500,000 Rs 500,000 Rs 500,000 Rs 2,000,000

Total selling Rs 960,000 Rs 1,085,000 Rs 960,000 Rs 1,045,000 Rs 4,050,000

Administrative Rs 300,000 Rs 300,000 Rs 300,000 Rs 300,000 Rs 1,200,000

expense

Total 1,260,000 1,385,000 Rs 1,260,000 Rs 1,345,000 Rs 5,250,000

 CASH BUDGET
Company Policies
The Beginning cash balance is Rs 500,000
Company have to maintain minimum cash balance of 400,000
Company can finance by receiving multiple of Rs 500,000 loan from bank
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
Beginning balance 1,000,000 Rs 663,800 Rs 588,600 Rs 802,400 Rs 1,000,000

Add: collection Rs 5,250,000 Rs 5,850,000 Rs 4,750,000 Rs 5,350,000 Rs 21,200,000

Total cash 6,250,000 Rs 6,513,800 Rs 5,338,600 Rs 6,152,400 Rs 22,200,000
Less: cash
payment:
Direct material Rs 1,481,000 Rs 1,680,000 Rs 1,431,000 Rs 1,508,000 Rs 6,100,000
Direct labor Rs 1,104,000 Rs 1,404,000 Rs 1,104,000 Rs 1,308,000 Rs 4,920,000
MOH Rs 1,741,200 Rs 1,956,200 Rs 1,741,200 Rs 1,887,400 Rs 7,326,000
Selling and admin Rs 1,260,000 Rs 1,385,000 Rs 1,260,000 Rs 1,345,000 Rs 5,250,000
Total payment Rs 5,586,200 Rs 6,425,200 Rs 5,536,200 Rs 6,048,400 Rs 23,596,000
Net Cash Rs 663,800 Rs 88,600 Rs (197,600) Rs 104,000 Rs (1,396,00,)
Minimum Rs 400,000 Rs 400,000 Rs 400,000 Rs 400,000 Rs 400,000
requirement
Excess (deficiency) Rs 263800 Rs (323,600) Rs (597,600) Rs (296,000) Rs 1,796,000
Financing 0 Rs 500,000 Rs 1,000,000 Rs 500,000 Rs 2,000,000
Ending Cash Rs 663,800 Rs 588,600 Rs 802,400 Rs 604,000 Rs 604,000
balance
 BUDGET INCOME STATEMENT

INCOME STATEMENT Amount (RS) (000’)

Revenue 21,000
Less: Cost of goods Sold
Direct Material 6,100
Direct Labor 4,920
MOH 7,326
Total COGS (18,346)
Gross Margin 2,654
Less: Selling and Admin expense
Selling expense Rs 4050
Administrative expense 1,200
Total expense (5250)
Net Income (Loss) (2,596)