You expect a total of rm20200000 to be spent on fixed

8. You expect a total of RM20,200,000 to be spent on fixed manufacturing overhead costs as
follows: Depreciation: RM4,040,000; Property taxes: RM1,010,000; Insurance: RM1,414,000;
Plant supervision: RM5,050,000; Fringe benefits: RM7,070,000; Miscellaneous: RM1,616,000.
Overheads are absorbed by budgeted volume of production.
9. You also estimate other operating costs for all the support departments. All support costs for
Sepang Bikes happen to be fixed as follows: Administration: RM16,478,215; Marketing:
RM9,886,929; Distribution: RM4,943,465; Customer service: RM1,647,821.

10. Income taxes are expected to be at the rate of 30%.
Required:
a. As the accountant at Sepang Bikes, develop a master budget for the review of the entity’s
controller, so that it can then be presented at a meeting with the CEO and the various
department heads. Create individual /functional budgets in the following order:
i. Sales budget
ii. Production budget
iii. Direct materials usage and purchases budget
iv. Direct labor budget
v. Manufacturing overhead budget
vi. Ending inventories budget
vii. Cost of goods sold budget
viii. Support department budget
ix. Budgeted statement of profit or loss
Answer
A)
1. Sales Revenue Budget:
Sales Revenue = Number of bikes expected to be sold * Selling Price per bike
= 100,000 * RM800
= RM80, 000,000.
2. Production Budget
Number of bikes to be manufactured = Closing stock of bikes + Expected bikes to be sold -
Opening stock of bikes
= 3500 + 100000 - 2500

= 101000
Cost of producing 101000 bikes = Direct material + Direct labour + Manufacturing overheads
= 101000*(20+70+50) + 101000*(1.5*25 + 0.15*15) + 101000*75
= RM25,729,750.
3. Direct materials usage and purchase budget:
Direct materials required to produce 101000 bikes = 101000*20 + 101000*70 + 101000*50
= RM14, 140,000.
Purchase budget
Wheels and tyres = 25000 + (101000*20) - 20000
= RM2, 025,000.
Components = 87500 + (101000*70) - 70000
= RM7, 087,500.
Frames = 62500 + (101000*50) - 50000
= RM5, 062,500
Total purchase cost = RM14, 175,000.
4. Direct labour budget = 101000*(1.5*25 + 0.15*15)
= RM 4, 014,750.
5. Manufacturing overhead budget = 101000 * 75 + 20200000
= RM27, 775,000.

6. Ending Inventories budget = Cost of Closing stock of bikes + Cost of closing direct
materials
= (3500*(20+70+50) + 3500*(1.5*25 + 0.15*15) + 3500*75) + 175000
= RM1,066,625.
7 . Cost of goods sold budget :
Cost of goods sold = Cost of opening inventory of bikes + Cost of producing remaining sold
units
= 1136875 + (100000-2500)*(20+70+50) + (100000-2500)*(1.5*25 + 0.15*15) + (100000-
2500)*75
= RM25, 975,000.