Valley Ltd., a medium-sized manufacturing firm, is reviewing its operational strategy for Q2 of 2025 due to an anticipated rise in market demand for…

Valley Ltd., a medium-sized manufacturing firm, is reviewing its operational strategy for Q2 of 2025 due to an anticipated rise in market demand for its signature product, ‘X'—a pre-packaged consumer item. To maintain profitability and manage costs efficiently, the management team is preparing a detailed budget. The following information are made available for this purpose: (a) It expects to sell 50,000 bags of ‘X' during the second quarter of 2025 at the selling price of 9 per bag. (b) Each bag of 'X' requires 2.5 kgs. of a raw material called 'Y' and 7.5 kgs. of raw material called 'Z'. (c) Stock levels are planned as follows: Particulars Beginning of Quarter End of Quarter Finished Bags of 'X' (Nos.) 15,000 11,000 Raw – Material ‘Y' (Kgs.) 32,000 26,000 Raw – Material 'Z' (Kgs.) 57,000 47,000 Empty Bag (Nos.) 37,000 28,000 (d) 'Y' cost - 1.20 per Kg., 'Z' costs 20 paise per Kg. and 'Empty Bag' costs 80 paise each. (e) It requires 9 minutes of direct labour to produce and fill one bag of 'X'. Labour cost is 5 per hour. (f) Variable manufacturing costs are - 0.45 bag. Fixed manufacturing costs - 30,000 per quarter. (g) Variable selling and administration expenses are 5% of sales and fixed administration and selling expenses are - 25,000 per quarter. As part of the budgeting exercise, management is looking for clarity on production needs, raw material purchases, cost per unit, and profitability to support strategic decisions and investor confidence. Based on above information, you are required to answer the following (MCQs 6 to 10):