Question

INFORMATION
The following information is available to determine the budget requirements of Medico Limited for January 2021:
1.	Projected sales of Product Med for January and February 2021:
January	February
15 000 units at R30 each	12 000 units at R32 each

2.	The policy of Medico Limited is to maintain a closing inventory equal to 40% of the budgeted sales of the following month.

3.	Two (2) labour hours are required to produce one unit of Product Med and the rate per hour is R10.
4.	Overheads are projected at a rate of R3 per direct labour hour.
5.	The estimated total production costs per unit (including the costs above) are R40 for January 2021 and R38 for December 2020.

REQUIRED
Use the information provided above to prepare the following budgets for January 2021:
1.1	Sales Budget (units and Rands)	(1 mark)
1.2	Production Budget (units)	(3 marks)
1.3	Direct Labour Budget (Rands)	(2 marks)
1.4	Overheads Budget (Rands)	(2 marks)
1.5	Cost of Sales Budget (Rands)	(2 marks

Answer 1

Sales Juugel month sales(unit) price per unit sales in rands jan feb total 15000 12000 27000 32 450000 384000 834000 30 jan feb 12000 production budget month forecasted sales add: closing inventory required less: opening inventory total production in units 15000 4800 (40% of following month) 19800 jan 19800 direct labor budget month units to be produced (from production budget) hours required per unit total labor hours rate per hour total labor cost 39600 10 396000 jan 396000 overheads budget month units to be produced (from production budget) hours required per unit total labor hours overhead per hour total overhead cost 792000 2376000 jan cost of sales budget month closing inventory production cost per unit cost of sales 4800 40 192000