X Ltd. has carefully analyzed market trends and consumer behaviour to project its sales figures for the upcoming year as follows: Quarter Sales…

CA Intermediate · Cost and Management Accounting · RTP · September 2025
X Ltd. has carefully analyzed market trends and consumer behaviour to project its sales figures for the upcoming year as follows: Quarter Sales (Units) I 45,000 II 56,250 III 61,875 IV 67,500 Information regarding production and finished goods stock is as follows: Opening Stock of Finished Goods 11,250 Units Expected Closing Stock of Finished Goods at the end of the year 18,375 Units Production Pattern 75% of Current Quarter Sales Plus 25% of Next Quarter Sales Closing Stock of current quarter to be maintained 25% of Next Quarter Sales Further information regarding stock of raw materials is as follows: Opening Stock of Raw Materials 15,000 Units Required Closing Stock of Raw Materials at the end of the year 7,500 Units Each unit of finished output requires 4 kg. of raw materials. The company plans to acquire its total annual requirement of raw materials during the first three quarters, in the specified proportions and at the prices detailed below: Quarter Purchase of raw materials % to total annual requirement in quantity Price per kg. (₹) I 25% 12 II 50% 13 III 25% 14 You are required to PREPARE the following for the next year, quarter wise: (i) Production budget (in units). (ii) Raw material consumption budget (in quantity). (iii) Raw material purchase budget (in quantity). (iv) Raw material purchase budget (in value).

Suggested Answer and Working Notes:

Working Note: Calculation of total annual production Particulars (Units) Sales in 4 quarters 2,30,625 Add: Closing balance 18,375 Less: Opening balance (11,250) Total number of units to be produced in the next year 2,37,750 (i) Production Budget (in units) Quarters I (Units) II (Units) III (Units) IV (Units) Total (Units) Sales 45,000 56,250 61,875 67,500 2,30,625 Production in current quarter (75% of the sale of current quarter) 33,750 42,188 46,406 50,625 Production for next quarter (25% of the sale of next quarter) 14,063 15,469 16,875 18,375 Total production 47,813 57,656 63,281 69,000 2,37,750 (ii) Raw material consumption budget in quantity Quarters I II III IV Total Units to be produced in each quarter: (A) 47,813 57,656 63,281 69,000 2,37,750 Raw material consumption p.u. (kg.): (B) 4 4 4 4 Total raw material consumption (Kg.): (A × B) 1,91,250 2,30,625 2,53,125 2,76,000 9,51,000 (iii) Raw material purchase budget (in quantity) Particulars Qty. (kg.) Raw material required for production 9,51,000 Add: Closing balance of raw material 7,500 9,58,500 Less: Opening balance (15,000) Material to be purchased 9,43,500 (iv) Raw material purchase budget (in value) Quarters % of annual requirement Qty. of material (kg.) Rate per kg. (₹) Amount (₹) I 25% 9,43,500 kg. x 25% = 2,35,875 12 28,30,500 II 50% 9,43,500 kg. x 50% = 4,71,750 13 61,32,750 III 25% 9,43,500 kg. x 25% = 2,35,875 14 33,02,250 Total 9,43,500 1,22,65,500

Topics: Budgets and Budgetary Control

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