Per Unit

Preparation of Master Budget

Soften Limited manufactures one product known as EC2. The following information relates to the preparation of the budget for the year to 31 December 2007.

1. Sales budget details for product Ec2:

• Expected selling price per unit: 100

• Expected sales in units: 10 000

• All sales are on credit terms.

2. EC2 requires 5 units of raw material E and 10 units of raw material C. E is expected to cost 3 per unit, and C 4 per unit. All goods are purchased on credit terms.

3. Two departments are involved in producing EC2: machining and assembly. The following information is relevant:

Direct labor per unit Direct labor rate per hour

Machining 1 6

Assembling 0.5 8

4. The finished production overhead costs are expected to amount to 100 000.

5. At 1 Jan, 2007, 800 units of EC2 are expected to be in stock at a value of 52 000, 4500 units of raw material E at a value of 13 500, and 12 000 units of raw materials are planned to be 10% above the expected opening stock levels as at 1 Jan, 2007.

6. Administration, selling and distribution overhead is expected to amount to 150 000.

7. Other relevant information:

a. Opening trade debtors are expected to be 80 000. Closing trade debtors are expected to amount to 15% of the total sales for the year.

b. Opening trade creditors are expected to be 28 000. Closing trade creditors are expected to amount to 10% of the purchased for the year.

c. All other expenses will be paid in cash during the year.

d. Other balances as 1 Jan, 2007 are expected to be as follows:

I) Share capital: ordinary shares 225 000

II) Retained profits 17 500

III) Proposed dividend 75 000

IV) Fixed assets at cost 250 000

Less: Accumulated depreciation 100 000...