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Budgeting and Cost Analysis for Jaka Sdn Bhd and RantauBags Company; Ethical Behavior for Managers a

Sales and Production Budgets for Jaka Sdn Bhd

1 Jaka Sdn Bhd., manufactures and sells concrete blocks for residential and commercial building. Jaka expects the following sales unit, price per unit and desired ending inventory for year 2021.

Inventories for both 1st January 2021 and 1st January 2022 are expected to be 100,000 blocks.

The raw materials and direct labour required for each concrete block are as follows:

Jaka’s policy is to have 5 million kg of raw materials in ending inventory for the third and fourth quarters and 8 million kg of the materials in ending inventory for the first and second quarters. 

Prepare the following budgets for the year 2021:

(a)Sales budget. Show total sales by quarter and in total for the year.

(b)Production budget. Show total production unit by quarter and in total for the year.

(c)Direct material usage and purchase budget.

(d)Direct labour budget.

2 Based Jaka’s experience, fifty percent (50%) of sales are paid in cash. Of the sales on account, seventy percent (70%) are collected in the quarter of sale; the remaining thirty percent (30%) are collected in the quarter following the sale. Total sales for the fourth quarter of 2020 totaled RM2,000,000.

Refer to the sales budget prepared in Task 1. Construct a cash receipts budget including an accounts receivable aging schedule for Jaka Sdn Bhd for each quarter of year 2021. To enable learners to utilise the Cost Volume Profit analysis in making informed decisions and cost effective actions related to the products or services the business sells.

3 RantauBags Company plans to sell 10,000 handbags at RM400 each in the coming year. Data on cost per handbag are as follows:

Variable selling expense is a commission of 5 percent of the sales price. Total fixed factory overhead amounts to RM800,000. Fixed selling and administrative expense totals RM400,000.

(a)Prepare a contribution margin income statement for RantauBags for the coming year.

(b)What is the effect on RantauBags operating income if 13,000 units are manufactured and sold next year? Show computation.

(c)Calculate the number of units RantauBags must sell in order to breakeven.

(d)Calculate the number of units RantauBags must sell to achieve a target operating income of RM240,000.

(e)Calculate the margin of safety in sales (RM) for the coming year.

(f)Discuss TWO benefits of manager’s possessing the knowledge/understanding on cost-volume-profit analysis.

4 To enable learners to explain what ethical behaviour means to managers and management accountants. Ethical behaviour for managers and management accountants. Mr Asrul, the purchasing agent for a Tenggara Manufacturing Division was considering the possibility of purchasing a component from a new supplier. The price is RM0.70 which is below the standard price of RM0.90.  The favourable price variance would help Asrul to produce an impressive performance report which is good enough to qualify him for an annual bonus. More importantly, a good performance this year would secure him a position at the headquarters with a significant salary increase.

However, there was doubt on his part knowing the background of the new supplier. Reports were basically negative, indicating that the supplier was known to make two to three delivery on time, but being unreliable there on. There were also questions regarding the quality of the parts delivered, with life of the components being 25 percent less than what normal sources would provide.  

If the component was purchased, no problems would surface for several months. By then, Asrul would already be at the headquarters. Considering the minimum personal risk, Asrul continues with the decision to purchase from the new supplier.

Discuss whether Asrul’s action is ethical.  Do you think that the use of standards and practice of holding individuals accountable for their achievement played major roles in Asrul’s decisions?

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