Abaco Company manufactures and sells a product called Dressie. The company recently engaged you to assist in budgetin

[answerhappygod]

Abaco Company manufactures and sells a product called Dressie.
The company recently engaged you to assist in
budgeting activities of the organization. The following data
is available in relation to projections for June 2022:


Product
Dressie
Projected sales [units]

1 200
Budgeted selling price per unit

P87.00
Opening stock of finished goods [in units]

400
Budgeted closing stock [in units]

500
Each Dressie requires 8.5 meters of direct material to produce.
Opening stock level of direct materials was 100 metres. In
preparation for year-end, inventory levels will be increased by
20%.
Required:
Prepare the Production budget and the Material
Budgets.
[4]
[ii] In relation to the Materials Budget prepared in above,
comment on inventory levels maintained by the Abaco Company. Would
you change these inventory levels, or would you maintain them?
Explain.


[3]

Chris Mass Limited makes and sells wrist watches fitted with a
heart rate monitor. The company has been operating since 2015, and
now have three [3] branches around the city of Francistown.
After making a reasonable profit of P1 286 000 in 2021, the company
is considering establishing a watch manufacturing shop in Durban.
They expect the cost of purchasing premises for the shop to
be P4 000 000, with fixed operational costs estimated at P490 000
per month.
Chris Mass has ascertained the following data related to production
activities in one of its Francistown branches:
Output of watches
Total production costs [P]

Month 1 0
140
000
Month 2 270
223
000
Month 3 200
220
000
Month 4 350
259
000
Month 5 270
229
000
Month 6 300
230
000
The wrist watches have an average selling price of P1 110 per
unit. The company estimates that 270 watches will be produced and
sold in Durban during the first month of operation.
Required:
Use the High-Low method to estimate production costs and sales
in the first month of operations in Durban.


[6]
[ii] Use the information given in the scenario above and your
answer in above to discuss two [2] limitations of the High-Low
method.

[4]
[iii] In your opinion is the company using appropriate data in
making projects on Durban operations? Explain.