Preparation of functional budgetsDataWilmslow Ltd makes two products the Alpha a

Preparation of functional budgetsDataWilmslow Ltd makes two products the Alpha and the Beta. Both products use the same material and labour but in different amounts. The company divides its year into four quarters each of twelve weeks. Each week consists of five days and each day comprises 7 hours.You are employed as the management accountant to Wilmslow Ltd.and you originally prepared a budget for quarter 3 the twelve weeks to 17 September. The basic data for that budget is reproduced below.Original budgetary data: quarter 312 weeks to 17 SeptemberProductAlphaBetaEstimated demand1800 units2100 unitsMaterial per unit8 kilograms12 kilogramsLabour per unit3 hours6 hoursSince the budget was prepared three developments have taken place.1. The company has begun to use linear regression and seasonal variations to forecast sales demand. Because of this the estimated demand for quarter 3 has been revised to 2000 Alphas and 2400 Betas.2. As a result of the revised sales forecasting you have developed more precise estimates of sales and closing stock levels.3. New equipment has been installed. The workforce is not familiar with the equipment. Because of this for quarter 3 they will only be working at 80% of the efficiency assumed in the original budgetary data.Other data from your original budget which has not changed is reproduced below:3 are as follows:500 units600 units12 000 kilogramsTask 1The production director of Wilmslow Ltd wants to schedule production for quarter 3 (the twelve weeks ending 17 September) and asks you to use the revised information to prepare the following:(a) the revised production budget for Alphas and Betas;(b) the material purchases budget in kilograms;(c) a statement showing the cost of the material purchases;(d) the labour budget in hours;(e) a statement showing the cost of labour.DataMargaret Brown is the financial director of Wilm-slow Ltd. She is not convinced that the use of linear regression even when adjusted for seasonal variations is the best way of forecasting sales volumes for Wilmslow Ltd.The quality of sales forecasting is an agenda item for the next meeting of the Board of Directors and she asks for your advice.Task 2Write a brief memo to Margaret Brown. Your memo should:(a) identify two limitations of the use of linear regression as a forecasting technique;(b) suggest two other ways of sales forecasting.

You can leave a response, or trackback from your own site.
error: Content is protected !!