Financial Accounting Report and Budget Recommendations for 2018

This accounting report analyzes the financial performance of Exhibition Furniture, focusing on budget recommendations for 2018. It examines revenue projections, cost of goods sold, and inventory management, particularly the impact of increasing prices for raw materials like oak tops and legs. The report highlights the company's use of the FIFO method and identifies key issues such as rising material costs and the need for efficient resource utilization. Recommendations include inviting quotations for raw materials, optimizing resource use, implementing an effective appraisal method for overhead costs, and adopting modern equipment to enhance production efficiency and customer satisfaction. The report aims to improve the company's financial performance and operational efficiency through strategic budgeting and cost control measures, as detailed in the memorandum to the CEO.

Running head: ACCOUNTING
Accounting
Name of the Student:
Name of the University:
Authors Note:

1ACCOUNTING
Table of Contents
Answer to Question 1......................................................................................................................2
a)...................................................................................................................................................2
b)..................................................................................................................................................2
c)...................................................................................................................................................2
d)..................................................................................................................................................7
e)...................................................................................................................................................8
f)...................................................................................................................................................9
g)................................................................................................................................................10
h)................................................................................................................................................11
i).................................................................................................................................................12
j).................................................................................................................................................13
k)................................................................................................................................................14
l).................................................................................................................................................15
Answer to Question 2....................................................................................................................16
Reference.......................................................................................................................................22

2ACCOUNTING
Answer to Question 1
a)
Statement showing Revenue budget
Particulars Units Unit price ($) Amount ($)
Revenue from sale 2000 desks 800 per desk 1600000
b)
Statement showing Production budget
Particulars Units
Expected sales (no. of desks) 2000
Add: Closing inventory 300
2300
Less: Opening inventory 200
No. of desks to be produced 2100
c)

3ACCOUNTING
Statement showing Direct material usage budget
Particulars Amount
Oak Tops required production 6300
Oak legs required for production 8400

4ACCOUNTING
Statement showing Direct material purchase budget (Units)
Particulars Units
Oak Tops required production 6300
Add: Closing inventory 24
6324
Less: Opening inventory 40
Oak Tops to be purchased (SQ. Mt) 6284
Oak legs required for production 8400
Add: Closing inventory 80
8480
Less: Opening inventory 100
Oak legs to be purchased 8380

5ACCOUNTING
Statement showing Direct material usage budget:
Oak Tops required production 6300
Oak legs required for production 8400
Direct material usage budget ($):
Particulars Units Amount
Oak Tops required production 6300 756000
Oak legs required for production 8400 58800

6ACCOUNTING
Statement showing direct material purchase budget ($):
Particulars Units Amount
Oak Tops required production 6300
Add: Closing inventory 24
6324
Less: Opening inventory 40
Oak Tops to be purchased (SQ. Mt) 6284 754080
Oak legs required for production 8400
Add: Closing inventory 80
8480
Less: Opening inventory 100
Oak legs to be purchased 8380 58660

7ACCOUNTING
d)
Statement showing Direct manufacturing labour budget
Particulars Amount
No. of desks to be manufactured 2100
Direct manufacturing labour hour required 3 hours per desk
Total hours of direct manufacturing labour required 6300
Direct labour rate 55 per hour
Direct manufacturing labour cost ($) 346500

8ACCOUNTING
e)
Statement showing Manufacturing overhead budget
Particulars Amount
Variable manufacturing overhead
Total hours of direct manufacturing labour required 6300
Variable manufacturing overhead rate $20 per hour
Variable manufacturing overhead 126000
Fixed manufacturing overhead 50000
Total manufacturing overhead 176000

9ACCOUNTING
f)
Statement showing budgeted manufacturing overhead rate
Particulars Amount
Total manufacturing overhead 176000
Total hours of direct manufacturing labour required 6300
Budgeted manufacturing overhead rate 27.9365

10ACCOUNTING
g)
Calculation of Budgeted manufacturing overhead cost per output unit in 2018
Particulars Amount
Total manufacturing overhead 176000
Total number of desks to be manufactured 2100
Budgeted manufacturing overhead cost per output unit in 2018 ($) 83.8095

11ACCOUNTING
h)
Calculation of Unit cost of desk in closing inventory (FIFO)
Particulars
Direct material usage cost:
Oak Tops required production 6300 756000
Oak legs required for production 8400 58800
814800
Direct labour 3 hours per desk 2100 desks
Total direct labour (In hours) 6300
Rate $55 per hour
Direct labour cost 346500
Direct manufacturing overhead