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MRANGARINI $($T$)$ Ltd prepares the budgets at the beginning of every year.$\mathrm{ }\text{ }\mathrm{ }$At the beginning of financial year $1$st April $2023,$ you got the data from its records.

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MRANGARINI $($T$)$ LTD$.$

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Balance sheet as at $31/3/2022$:

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Non$-$Current Assets

TZS$\mathrm{’}000$

TZS$\mathrm{’}000$

Plant & equipment

$75,000$

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Less: Accumulated depreciation

$25,000$

$50,000$

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Current Assets:

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Inventories:

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Raw materials $600$kgs@ $1,000/=$

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$600$

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Finished goods $480$ units @$55,000$

$26,400$

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$27,000$

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Debtors

$7,500$

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Cash

$17,500$

$52,000$

Total Assets

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$\mathrm{Â }1\text{Â }0\text{Â }2\text{Â },0\text{Â }0\text{Â }0$

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Equity & Liabilities

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Share Capital

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$30,000$

Earnings

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$69,500$

Owner$\mathrm{’}$s equity

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$99,500$

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Current Liabilities:

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Creditors

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$2,500$

Capital employed

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$\mathrm{Â }1\text{Â }0\text{Â }2\text{Â },0\text{Â }0\text{Â }0$

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Basing on the above balance sheet, the master budget for the financial year commencing on $1$st $\mathrm{ }$April$,\text{ }2023$ has to be prepared with the following additional information:$-$

$($a$)$ The chief executive officer in his communication in budget guidelines hinted on the following:$-$

i$.\mathrm{ }\mathrm{ }\mathrm{ }\mathrm{ }$ Increase selling price per unit from the current $65,000/=$ per unit to $70,000/-$ per unit

ii$.\mathrm{ }\mathrm{ }\mathrm{ }\mathrm{ }$ Allocate $3\%$ of sales to Research & Development $($R&D$)$ in order to keep abreast with technology and contain the competition.

iii.$\mathrm{ }\mathrm{ }\mathrm{ }\mathrm{ }$ Each head of department is to submit his$/$her budget to the Budget Officer within one week

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$($b$)\mathrm{Â }\mathrm{Â }\mathrm{Â }\mathrm{Â }\text{Â }\mathrm{Â }$The Marketing Officer has come up with the following estimates of sales.

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Quarter

Estimated sales $($units$)$

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$1$st

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$2,500$

$2$nd

$2,800$

$3$rd

$1,700$

$4$th

$3,000$

$1$st Quarter next financial$\mathrm{Â }\text{Â }\mathrm{Â }$year

$3,000$

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He has indicated that the selling price of $70,000/=$ will be acceptable to the market. $\mathrm{ }$But advertising expenditure has to be increased to $5\%$ of sales.

$($c$)\mathrm{Â }\mathrm{Â }\mathrm{Â }\mathrm{Â }\text{Â }\mathrm{Â }$Production manager has given the following unit costs for manufacturing a unit of

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the product.

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TZS

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Raw material $(10$ meters @ $1,000/=)$

$10,000$

Direct labour $(1\mathrm{.}5$ hrs @ $20,000/=)$

$30,000$

Variable overhead $(50\%$ of direct labour$)$

$15,000$

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Total variable cost

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$\mathrm{Â }5\text{Â }5\text{Â },00\text{Â }0$

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Fixed manufacturing overhead per quarter$\mathrm{Â }\mathrm{Â }\mathrm{Â }\mathrm{Â }\mathrm{Â }\mathrm{Â }\mathrm{Â }\mathrm{Â }\mathrm{Â }\mathrm{Â }\mathrm{Â }\mathrm{Â }\mathrm{Â }\mathrm{Â }\mathrm{Â }\mathrm{Â }\mathrm{Â }\text{Â }\mathrm{Â }2,400,000/=$

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The $\mathrm{ }$fixed $\mathrm{ }$manufacturing $\mathrm{ }$overhead $\mathrm{ }$cost $\mathrm{ }$above $\mathrm{ }$includes $\mathrm{ }$depreciation $\mathrm{ }$on $\mathrm{ }$plant $\mathrm{ }$and equipment of $1,500,000/=$ per quarter.

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Production manager advised that it$\mathrm{’}$s better to keep closing inventory of raw materials which is equal to $10\%$ of next quarter$\mathrm{’}$s requirements because suppliers are erratic. Closing inventory of raw materials in quarter three will be the same figure as in quarter four.

From experience, he also advises to hold finished goods inventory worth $20\%$ of expected sales of the next quarter.

$($d$)$ The Purchasing Officer expects raw$-$materials to cost $1,000/=$ per unit in each Quarter $($e$)$ The financial controller advises the organization to tighten up on the collection debts: $\mathrm{“}$We should plan for $70\%$ of sales being collected in quarter of sales and the balance being collected in the next quarter,$\mathrm{”}$ he said. He further advises that raw materials purchases should be paid $60\%$ in the quarter of purchase and $40\%$ in the next quarter.

$($f$)$ Administrative overheads are expected to cost $2,000,000/=$ per quarter.

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$($g$)$ All other costs are expected to be paid in the quarter in which they are incurred.

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Required:

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As the company$\mathrm{’}$s accountant, you$\mathrm{’}$re required to come up with a master budget including:

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I.$\mathrm{Â }\mathrm{Â }\mathrm{Â }\text{Â }\mathrm{Â }$Sales budget

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II$.\mathrm{Â }\mathrm{Â }\mathrm{Â }\text{Â }\mathrm{Â }$Production budget

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III.$\mathrm{Â }\mathrm{Â }\mathrm{Â }\text{Â }\mathrm{Â }$Raw$-$material utilization and purchases budget

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IV$.\mathrm{Â }\mathrm{Â }\mathrm{Â }\text{Â }\mathrm{Â }$Direct labour budget

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V$.\mathrm{Â }\mathrm{Â }\mathrm{Â }\text{Â }\mathrm{Â }$Manufacturing overheads budget, selling and administrative overheads budget

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VI$.\mathrm{Â }\mathrm{Â }\mathrm{Â }\text{Â }\mathrm{Â }$Cash budget

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VII.$\mathrm{Â }\mathrm{Â }\mathrm{Â }\text{Â }\mathrm{Â }$Budgeted income statement and budgeted balance sheet.

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