xl co ltd manufactures two products using one type of material and one grade of labo 622058

Model 6: Material-purchase budget and Direct (labour) wages budget

XL Co. Ltd manufactures two products using one type of material and one grade of labour. Following is an extract from the company’s working papers for the next period’s budget:

Particulars	Product X	Product Y
Budgeted sales (unit)	6,300	8,400
Budgeted material consumption per product (kg.)	3	5
Budgeted material cost, Rs. 10 per kg.
Standard hours allowed per product
Budgeted wage rate, Rs. 5 per hour	5	3

Overtime premium is 50% and is payable, if a worker works for more than 40 hours a week. There are 100 direct workers.

The target-productivity ratio (or efficiency ratio) for the productive hours worked by the direct workers in actually manufacturing the products is 80%; in addition to the non-productive downtime which is budgeted at 20% of productive hours worked.

There are 12 five-day weeks in the budget period and it is anticipated that sales and production will occur evenly throughout the whole period.

It is anticipated that stock at the beginning of the period will be:

Product X: 1,000 units; Product Y: 2,000 units; and Raw material: 4,000 kg

The target-closing stock, expressed in terms of anticipated activity during budget period, is:

Product X: 15 days sales; Product Y: 20 days sales; and Raw material: 10 days consumption.

Required:

Calculate (a) the material-purchase budget.

(b) the wages budget for direct workers showing the quantities and values, for the next period.