Managerial Accounting

Hildebrandt St. Martins manufactures a single product. Its budget sales (in units) for December 2008 are 9350. Opening inventory of finished goods for the month is budgeted at 12 360 units and closing inventory is budgeted at 13 475 units.Each unit of finished goods inventory uses 2kg of a raw material that is forecast to cost €3 per kilo. Opening inventory of raw material at the beginning of December 2008 is forecast at 18 000 kilos, but closing inventory for the month should fall to 16 000 kilos.

What is the budget amount in €s of purchases of this raw material for December 2008?

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a) €56 790

b) €68 790

c) €49 410

d) €55 410

It is widely recognised that budget setting can be mishandled in organisations and may result in some undesirable effects that work against an organisation’s best interests.

Write a short report that describes potential problems that may arise if budgeting is not handled properly

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