Define a Master Budget. What are its two primary component divisions?

Master Budget A master budget is the comprehensive, consolidated operational and financial plan summarizing all individual sub-budgets of an organization for a future accounting period. Two Divisions: 1. Operating Budget: Sales, production, direct materials, labor, and overhead budgets. 2. Financial Budget: Capital expenditure budget, cash budget, and budgeted balance sheet.

Distinguish between a Fixed Budget and a Flexible Budget.

Fixed vs. Flexible Budget • Fixed (Static) Budget: Formulated for a single, predetermined activity level, remaining unchanged regardless of actual output fluctuations. • Flexible Budget: Designed to automatically adjust and benchmark costs across varying levels of activity, distinguishing fixed from variable costs.

What is Zero-Base Budgeting (ZBB)? How does it differ from incremental budgeting?

Zero-Base Budgeting (ZBB) ZBB is a budgeting approach where every department must justify every proposed expenditure from a 'zero base' at the start of each period, building Decision Packages rather than simply adding a percentage increase to the prior year's budget (incremental budgeting).

State the formula to compute Units to be Produced in a Production Budget.

Units to be Produced Formula \text{Required Production Units} = \text{Budgeted Sales Units} + \text{Desired Ending Finished Goods Inventory} - \text{Beginning Finished Goods Inventory}

Define Principal Budget Factor (Key Limiting Factor).

Principal Budget Factor The principal budget factor (or key limiting factor) is the operational constraint or resource bottleneck (e.g., sales demand, machine hours, skilled labor, or raw material availability) that restricts enterprise output and around which all other sub-budgets must be coordinated.

Prepare a Flexible Budget for Apex Industrial Corp. for production activity levels of 70%, 80%, and 90% based on the following 60% capacity (6,000 units) data: • Direct Materials: Rs 50 per unit (100% variable) • Direct Labor: Rs 30 per unit (100% variable) • Production Overheads: Rs 120,000 (60% fixed, 40% variable) • Administrative Overheads: Rs 80,000 (80% fixed, 20% variable) • Selling and Distribution Overheads: Rs 60,000 (50% fixed, 50% variable)

Flexible Budget Preparation for Apex Industrial Corp. 1. Cost Behavior Segregation (at 60% capacity = 6,000 units) • Direct Materials: Variable = Rs 50/unit • Direct Labor: Variable = Rs 30/unit • Production Overheads (Rs 120,000): - Fixed = 60\% \times 120{,}000 = \text{Rs } 72{,}000 - Variable = 40\% \times 120{,}000 = \text{Rs } 48{,}000 \implies \frac{48{,}000}{6{,}000} = \text{Rs } 8/\text{unit} • Administrative Overheads (Rs 80,000): - Fixed = 80\% \times 80{,}000 = \text{Rs } 64{,}000 - Variable = 20\% \times 80{,}000 = \text{Rs } 16{,}000 \implies \frac{16{,}000}{6{,}000} = \text{Rs } 2.67/\text{unit} • Selling Overheads (Rs 60,000): - Fixed = 50\% \times 60{,}000 = \text{Rs } 30{,}000 - Variable = 50\% \times 60{,}000 = \text{Rs } 30{,}000 \implies \frac{30{,}000}{6{,}000} = \text{Rs } 5/\text{unit} 2. Flexible Budget Statement | Cost Elements | Unit Rate (Rs) | 70% Capacity (7,000 units) | 80% Capacity (8,000 units) | 90% Capacity (9,000 units) | | :--- | :--- | :--- | :--- | :--- | | Variable Costs: | | | | | | Direct Materials | 50.00 | 350,000 | 400,000 | 450,000 | | Direct Labor | 30.00 | 210,000 | 240,000 | 270,000 | | Variable Production Overheads | 8.00 | 56,000 | 64,000 | 72,000 | | Variable Admin Overheads | 2.67 | 18,667 | 21,333 | 24,000 | | Variable Selling Overheads | 5.00 | 35,000 | 40,000 | 45,000 | | Total Variable Cost | 95.67 | 669,667 | 765,333 | 861,000 | | Fixed Costs: | | | | | | Fixed Production Overheads | | 72,000 | 72,000 | 72,000 | | Fixed Admin Overheads | | 64,000 | 64,000 | 64,000 | | Fixed Selling Overheads | | 30,000 | 30,000 | 30,000 | | Total Fixed Cost | | 166,000 | 166,000 | 166,000 | | Total Budgeted Cost | | 835,667 | 931,333 | 1,027,000 |

From the following information, prepare a Cash Budget for Himalayan Traders for three months: Shrawan, Bhadra, and Ashwin 2080: • Expected opening cash balance on 1 Shrawan 2080: Rs 80,000 • Budgeted Sales: Ashadh Rs 400,000; Shrawan Rs 500,000; Bhadra Rs 600,000; Ashwin Rs 700,000 • Credit Sales terms: 50% collected in month of sale, 50% collected in month following sale • Purchases: Shrawan Rs 300,000; Bhadra Rs 350,000; Ashwin Rs 400,000 (Paid in month following purchase; Ashadh purchases paid in Shrawan Rs 250,000) • Monthly wages: Rs 50,000 paid in the same month • Tax installment payable in Ashwin: Rs 60,000 • Purchase of delivery van in Bhadra: Rs 150,000

Cash Budget for Himalayan Traders For the Months: Shrawan, Bhadra, and Ashwin 2080 | Particulars | Shrawan (Rs) | Bhadra (Rs) | Ashwin (Rs) | | :--- | :--- | :--- | :--- | | Opening Cash Balance | 80,000 | 130,000 | 180,000 | | Cash Receipts: | | | | | Collections from Debtors: | | | | | - 50% Current Month Sales | 250,000 | 300,000 | 350,000 | | - 50% Previous Month Sales | 200,000 | 250,000 | 300,000 | | Total Cash Available (A) | 530,000 | 680,000 | 830,000 | | Cash Payments: | | | | | Payments to Suppliers (Prior month purchases) | 250,000 | 300,000 | 350,000 | | Wages and Salaries | 50,000 | 50,000 | 50,000 | | Purchase of Delivery Van | - | 150,000 | - | | Income Tax Installment | - | - | 60,000 | | Total Cash Disbursements (B) | 300,000 | 500,000 | 460,000 | | Closing Cash Balance (A - B) | 130,000 | 180,000 | 370,000 |

Explain Variance Analysis in Budgetary Control. Define Material Price Variance (MPV), Material Usage Variance (MUV), and Labor Efficiency Variance (LEV).

Variance Analysis in Budgetary Control Variance analysis is the quantitative investigation of discrepancies between standard budgeted performance and actual operational results to enforce management by exception. 1. Material Price Variance (MPV) \text{MPV} = \text{Actual Quantity Consumed} \times (\text{Standard Price} - \text{Actual Price}) \text{MPV} = AQ \times (SP - AP) • Favorable if AP SP. 2. Material Usage / Quantity Variance (MUV) \text{MUV} = \text{Standard Price} \times (\text{Standard Quantity for Actual Output} - \text{Actual Quantity}) \text{MUV} = SP \times (SQ - AQ) • Favorable if actual material consumed is less than standard allowance. 3. Labor Efficiency Variance (LEV) \text{LEV} = \text{Standard Wage Rate} \times (\text{Standard Hours Allowed} - \text{Actual Hours Worked}) \text{LEV} = SR \times (SH - AH)

Discuss the behavioral aspects of budgeting: Participative Budgeting vs. Top-Down Budgeting, and Budgetary Slack.

Behavioral Aspects of Budgeting Budgeting is not merely a quantitative accounting exercise; it drives employee behavior and motivation. 1. Participative (Bottom-Up) vs. Authoritarian (Top-Down) Budgeting • Authoritarian (Top-Down): Senior management dictates budget figures without frontline input. It ensures alignment with macro corporate strategies but fosters resentment and low commitment. • Participative (Bottom-Up): Operational managers actively participate in setting their departmental targets, enhancing ownership and motivation. 2. Budgetary Slack (Padding the Budget) • The deliberate practice where managers underestimate revenues and overestimate expenses to make performance targets easily achievable, protecting themselves from reprimand but suboptimizing firm performance.

Read the following scenario and answer the questions: Everest Beverages Ltd. manufactures a popular natural fruit juice. The sales manager forecasts sales for the upcoming four quarters of 2081 as follows: Q1: 40,000 cases; Q2: 60,000 cases; Q3: 80,000 cases; Q4: 50,000 cases; and Q1 of 2082: 45,000 cases. The selling price is Rs 500 per case. Operational Policies: • Finished goods inventory at the end of each quarter must equal 20% of the next quarter's budgeted sales. Finished goods on 1 Baisakh 2081: 8,000 cases. • Each case requires 2 kg of fruit pulp. Raw material inventory at the end of each quarter must equal 10% of the next quarter's production requirements. Raw material inventory on 1 Baisakh 2081: 9,000 kg. Cost of fruit pulp is Rs 60 per kg. • Each case requires 0.5 direct labor hours at a wage rate of Rs 120 per hour. Questions: a. Prepare the Production Budget (in cases) for each quarter of 2081 and for the full year. b. Prepare the Direct Materials Purchases Budget (in kg and Rs) for each quarter and the year. c. Prepare the Direct Labor Budget (in hours and Rs) for each quarter and the year. d. Evaluate the strategic importance of production smoothing vs. chase-demand scheduling in seasonal manufacturing.

Comprehensive Master Budgeting for Everest Beverages Ltd. a. Production Budget (in cases) for 2081 | Particulars | Q1 | Q2 | Q3 | Q4 | Total Year 2081 | | :--- | :--- | :--- | :--- | :--- | :--- | | Budgeted Sales (cases) | 40,000 | 60,000 | 80,000 | 50,000 | 230,000 | | Add: Desired Ending FG Inventory (20\% \times \text{next quarter}) | 12,000 | 16,000 | 10,000 | 9,000 (20\% \times 45K) | 9,000 | | Total Units Required | 52,000 | 76,000 | 90,000 | 59,000 | 239,000 | | Less: Beginning FG Inventory | (8,000) | (12,000) | (16,000) | (10,000) | (8,000) | | Budgeted Production (cases) | 44,000 | 64,000 | 74,000 | 49,000 | 231,000 | (Note: Production for Q1 2082 = 45{,}000 + 20\%(60{,}000) - 9{,}000 = 48{,}000 cases; pulp required = 96,000 kg). b. Direct Materials Purchases Budget (Fruit Pulp: 2 kg/case @ Rs 60/kg) | Particulars | Q1 | Q2 | Q3 | Q4 | Total Year 2081 | | :--- | :--- | :--- | :--- | :--- | :--- | | Budgeted Production (cases) | 44,000 | 64,000 | 74,000 | 49,000 | 231,000 | | Pulp Required per case (kg) | 2 | 2 | 2 | 2 | 2 | | Pulp Needed for Production (kg) | 88,000 | 128,000 | 148,000 | 98,000 | 462,000 | | Add: Desired Ending Pulp Inv (10\% \times \text{next Q}) | 12,800 | 14,800 | 9,800 | 9,600 (10\% \times 96K) | 9,600 | | Total Pulp Required (kg) | 100,800 | 142,800 | 157,800 | 107,600 | 471,600 | | Less: Beginning Pulp Inventory | (9,000) | (12,800) | (14,800) | (9,800) | (9,000) | | Required Pulp Purchases (kg) | 91,800 | 130,000 | 143,000 | 97,800 | 462,600 | | Price per kg | Rs 60 | Rs 60 | Rs 60 | Rs 60 | Rs 60 | | Total Cost of Pulp Purchases (Rs) | 5,508,000 | 7,800,000 | 8,580,000 | 5,868,000 | 27,756,000 | c. Direct Labor Budget (0.5 hours/case @ Rs 120/hr) | Particulars | Q1 | Q2 | Q3 | Q4 | Total Year 2081 | | :--- | :--- | :--- | :--- | :--- | :--- | | Budgeted Production (cases) | 44,000 | 64,000 | 74,000 | 49,000 | 231,000 | | Direct Labor Hours per case | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 | | Total Direct Labor Hours Needed | 22,000 | 32,000 | 37,000 | 24,500 | 115,500 | | Direct Labor Hourly Rate | Rs 120 | Rs 120 | Rs 120 | Rs 120 | Rs 120 | | Total Direct Labor Cost (Rs) | 2,640,000 | 3,840,000 | 4,440,000 | 2,940,000 | 13,860,000 | d. Production Smoothing vs. Chase-Demand Scheduling • Chase-Demand Strategy (Modeled above): Production closely tracks seasonal sales spikes (varying from 44,000 to 74,000 cases). Minimizes finished goods inventory holding and spoilage costs, but requires hiring temporary seasonal laborers, paying overtime premiums, and causing machine wear during peak quarters. • Level (Smoothing) Strategy: Producing a constant 57,750 cases every quarter (231{,}000 / 4). Stabilizes labor workforce and machinery capacity, but requires substantial warehouse space and financing to carry heavy inventories into peak seasons.

Dean's Office Official Model Question Paper – ACS 204

Tribhuvan University

Faculty of Management

Office of the Dean

Official Model Question Paper / Dean's Office Blueprint

Course: ACS 204 · Budgeting

Level: Bachelor of Business Management (BBM) · Semester 7

Full Marks: 60

Time: 3 hrs.

Candidates are required to give their answers in their own words as far as practicable. Figures in the margin indicate full marks.

Group A

Brief Answer Questions. Attempt ALL questions. (5 × 2 = 10)

[5*2=10]

Define a Master Budget. What are its two primary component divisions?

[2]
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Master Budget

A master budget is the comprehensive, consolidated operational and financial plan summarizing all individual sub-budgets of an organization for a future accounting period.

Two Divisions:
1. Operating Budget: Sales, production, direct materials, labor, and overhead budgets.
2. Financial Budget: Capital expenditure budget, cash budget, and budgeted balance sheet.
Distinguish between a Fixed Budget and a Flexible Budget.

[2]
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Fixed vs. Flexible Budget
- Fixed (Static) Budget: Formulated for a single, predetermined activity level, remaining unchanged regardless of actual output fluctuations.
- Flexible Budget: Designed to automatically adjust and benchmark costs across varying levels of activity, distinguishing fixed from variable costs.
What is Zero-Base Budgeting (ZBB)? How does it differ from incremental budgeting?

[2]
View model solution
Zero-Base Budgeting (ZBB)

ZBB is a budgeting approach where every department must justify every proposed expenditure from a ‘zero base’ at the start of each period, building Decision Packages rather than simply adding a percentage increase to the prior year’s budget (incremental budgeting).
State the formula to compute Units to be Produced in a Production Budget.

[2]
View model solution
Units to be Produced Formula

$\text{Required Production Units} = \text{Budgeted Sales Units} + \text{Desired Ending Finished Goods Inventory} - \text{Beginning Finished Goods Inventory}$
Define Principal Budget Factor (Key Limiting Factor).

[2]
View model solution
Principal Budget Factor

The principal budget factor (or key limiting factor) is the operational constraint or resource bottleneck (e.g., sales demand, machine hours, skilled labor, or raw material availability) that restricts enterprise output and around which all other sub-budgets must be coordinated.

Group B

Short Answer Questions. Attempt any THREE questions. (3 × 10 = 30)

[3*10=30]

Prepare a Flexible Budget for Apex Industrial Corp. for production activity levels of 70%, 80%, and 90% based on the following 60% capacity (6,000 units) data:

Direct Materials: Rs 50 per unit (100% variable)
Direct Labor: Rs 30 per unit (100% variable)
Production Overheads: Rs 120,000 (60% fixed, 40% variable)
Administrative Overheads: Rs 80,000 (80% fixed, 20% variable)
Selling and Distribution Overheads: Rs 60,000 (50% fixed, 50% variable)

[10]

View model solution

Flexible Budget Preparation for Apex Industrial Corp.

1. Cost Behavior Segregation (at 60% capacity = 6,000 units)

Direct Materials: Variable = Rs 50/unit
Direct Labor: Variable = Rs 30/unit
Production Overheads (Rs 120,000):
- Fixed = $60\% \times 120{,}000 = \text{Rs } 72{,}000$
- Variable = $40\% \times 120{,}000 = \text{Rs } 48{,}000 \implies \frac{48{,}000}{6{,}000} = \text{Rs } 8/\text{unit}$
Administrative Overheads (Rs 80,000):
- Fixed = $80\% \times 80{,}000 = \text{Rs } 64{,}000$
- Variable = $20\% \times 80{,}000 = \text{Rs } 16{,}000 \implies \frac{16{,}000}{6{,}000} = \text{Rs } 2.67/\text{unit}$
Selling Overheads (Rs 60,000):
- Fixed = $50\% \times 60{,}000 = \text{Rs } 30{,}000$
- Variable = $50\% \times 60{,}000 = \text{Rs } 30{,}000 \implies \frac{30{,}000}{6{,}000} = \text{Rs } 5/\text{unit}$

2. Flexible Budget Statement

Cost Elements	Unit Rate (Rs)	70% Capacity (7,000 units)	80% Capacity (8,000 units)	90% Capacity (9,000 units)
Variable Costs:
Direct Materials	50.00	350,000	400,000	450,000
Direct Labor	30.00	210,000	240,000	270,000
Variable Production Overheads	8.00	56,000	64,000	72,000
Variable Admin Overheads	2.67	18,667	21,333	24,000
Variable Selling Overheads	5.00	35,000	40,000	45,000
Total Variable Cost	95.67	669,667	765,333	861,000
Fixed Costs:
Fixed Production Overheads		72,000	72,000	72,000
Fixed Admin Overheads		64,000	64,000	64,000
Fixed Selling Overheads		30,000	30,000	30,000
Total Fixed Cost		166,000	166,000	166,000
Total Budgeted Cost		835,667	931,333	1,027,000

From the following information, prepare a Cash Budget for Himalayan Traders for three months: Shrawan, Bhadra, and Ashwin 2080:

Expected opening cash balance on 1 Shrawan 2080: Rs 80,000
Budgeted Sales: Ashadh Rs 400,000; Shrawan Rs 500,000; Bhadra Rs 600,000; Ashwin Rs 700,000
Credit Sales terms: 50% collected in month of sale, 50% collected in month following sale
Purchases: Shrawan Rs 300,000; Bhadra Rs 350,000; Ashwin Rs 400,000 (Paid in month following purchase; Ashadh purchases paid in Shrawan Rs 250,000)
Monthly wages: Rs 50,000 paid in the same month
Tax installment payable in Ashwin: Rs 60,000
Purchase of delivery van in Bhadra: Rs 150,000

[10]

View model solution

Cash Budget for Himalayan Traders

For the Months: Shrawan, Bhadra, and Ashwin 2080

Particulars	Shrawan (Rs)	Bhadra (Rs)	Ashwin (Rs)
Opening Cash Balance	80,000	130,000	180,000
Cash Receipts:
Collections from Debtors:
- 50% Current Month Sales	250,000	300,000	350,000
- 50% Previous Month Sales	200,000	250,000	300,000
Total Cash Available (A)	530,000	680,000	830,000
Cash Payments:
Payments to Suppliers (Prior month purchases)	250,000	300,000	350,000
Wages and Salaries	50,000	50,000	50,000
Purchase of Delivery Van	-	150,000	-
Income Tax Installment	-	-	60,000
Total Cash Disbursements (B)	300,000	500,000	460,000
Closing Cash Balance (A - B)	130,000	180,000	370,000

Explain Variance Analysis in Budgetary Control. Define Material Price Variance (MPV), Material Usage Variance (MUV), and Labor Efficiency Variance (LEV).

[10]
View model solution
Variance Analysis in Budgetary Control

Variance analysis is the quantitative investigation of discrepancies between standard budgeted performance and actual operational results to enforce management by exception.

1. Material Price Variance (MPV)

$\text{MPV} = \text{Actual Quantity Consumed} \times (\text{Standard Price} - \text{Actual Price})$
$\text{MPV} = AQ \times (SP - AP)$
- Favorable if $AP < SP$ ; Unfavorable if $AP > SP$ .
2. Material Usage / Quantity Variance (MUV)

$\text{MUV} = \text{Standard Price} \times (\text{Standard Quantity for Actual Output} - \text{Actual Quantity})$
$\text{MUV} = SP \times (SQ - AQ)$
- Favorable if actual material consumed is less than standard allowance.
3. Labor Efficiency Variance (LEV)

$\text{LEV} = \text{Standard Wage Rate} \times (\text{Standard Hours Allowed} - \text{Actual Hours Worked})$
$\text{LEV} = SR \times (SH - AH)$
Discuss the behavioral aspects of budgeting: Participative Budgeting vs. Top-Down Budgeting, and Budgetary Slack.

[10]
View model solution
Behavioral Aspects of Budgeting

Budgeting is not merely a quantitative accounting exercise; it drives employee behavior and motivation.

1. Participative (Bottom-Up) vs. Authoritarian (Top-Down) Budgeting
- Authoritarian (Top-Down): Senior management dictates budget figures without frontline input. It ensures alignment with macro corporate strategies but fosters resentment and low commitment.
- Participative (Bottom-Up): Operational managers actively participate in setting their departmental targets, enhancing ownership and motivation.
2. Budgetary Slack (Padding the Budget)
- The deliberate practice where managers underestimate revenues and overestimate expenses to make performance targets easily achievable, protecting themselves from reprimand but suboptimizing firm performance.

Group C

Comprehensive Answer / Case Analysis Question. (1 × 20 = 20)

[1*20=20]

Read the following scenario and answer the questions:

Everest Beverages Ltd. manufactures a popular natural fruit juice. The sales manager forecasts sales for the upcoming four quarters of 2081 as follows: Q1: 40,000 cases; Q2: 60,000 cases; Q3: 80,000 cases; Q4: 50,000 cases; and Q1 of 2082: 45,000 cases. The selling price is Rs 500 per case.

Operational Policies:

Finished goods inventory at the end of each quarter must equal 20% of the next quarter’s budgeted sales. Finished goods on 1 Baisakh 2081: 8,000 cases.
Each case requires 2 kg of fruit pulp. Raw material inventory at the end of each quarter must equal 10% of the next quarter’s production requirements. Raw material inventory on 1 Baisakh 2081: 9,000 kg. Cost of fruit pulp is Rs 60 per kg.
Each case requires 0.5 direct labor hours at a wage rate of Rs 120 per hour.

Questions: a. Prepare the Production Budget (in cases) for each quarter of 2081 and for the full year. b. Prepare the Direct Materials Purchases Budget (in kg and Rs) for each quarter and the year. c. Prepare the Direct Labor Budget (in hours and Rs) for each quarter and the year. d. Evaluate the strategic importance of production smoothing vs. chase-demand scheduling in seasonal manufacturing.

[20]

View model solution

Comprehensive Master Budgeting for Everest Beverages Ltd.

a. Production Budget (in cases) for 2081

Particulars	Q1	Q2	Q3	Q4	Total Year 2081
Budgeted Sales (cases)	40,000	60,000	80,000	50,000	230,000
Add: Desired Ending FG Inventory ( $20\% \times \text{next quarter}$ )	12,000	16,000	10,000	9,000 ( $20\% \times 45K$ )	9,000
Total Units Required	52,000	76,000	90,000	59,000	239,000
Less: Beginning FG Inventory	(8,000)	(12,000)	(16,000)	(10,000)	(8,000)
Budgeted Production (cases)	44,000	64,000	74,000	49,000	231,000

(Note: Production for Q1 2082 = $45{,}000 + 20\%(60{,}000) - 9{,}000 = 48{,}000$ cases; pulp required = 96,000 kg).

b. Direct Materials Purchases Budget (Fruit Pulp: 2 kg/case @ Rs 60/kg)

Particulars	Q1	Q2	Q3	Q4	Total Year 2081
Budgeted Production (cases)	44,000	64,000	74,000	49,000	231,000
Pulp Required per case (kg)	2	2	2	2	2
Pulp Needed for Production (kg)	88,000	128,000	148,000	98,000	462,000
Add: Desired Ending Pulp Inv ( $10\% \times \text{next Q}$ )	12,800	14,800	9,800	9,600 ( $10\% \times 96K$ )	9,600
Total Pulp Required (kg)	100,800	142,800	157,800	107,600	471,600
Less: Beginning Pulp Inventory	(9,000)	(12,800)	(14,800)	(9,800)	(9,000)
Required Pulp Purchases (kg)	91,800	130,000	143,000	97,800	462,600
Price per kg	Rs 60	Rs 60	Rs 60	Rs 60	Rs 60
Total Cost of Pulp Purchases (Rs)	5,508,000	7,800,000	8,580,000	5,868,000	27,756,000

c. Direct Labor Budget (0.5 hours/case @ Rs 120/hr)

Particulars	Q1	Q2	Q3	Q4	Total Year 2081
Budgeted Production (cases)	44,000	64,000	74,000	49,000	231,000
Direct Labor Hours per case	0.5	0.5	0.5	0.5	0.5
Total Direct Labor Hours Needed	22,000	32,000	37,000	24,500	115,500
Direct Labor Hourly Rate	Rs 120	Rs 120	Rs 120	Rs 120	Rs 120
Total Direct Labor Cost (Rs)	2,640,000	3,840,000	4,440,000	2,940,000	13,860,000

d. Production Smoothing vs. Chase-Demand Scheduling

Chase-Demand Strategy (Modeled above): Production closely tracks seasonal sales spikes (varying from 44,000 to 74,000 cases). Minimizes finished goods inventory holding and spoilage costs, but requires hiring temporary seasonal laborers, paying overtime premiums, and causing machine wear during peak quarters.
Level (Smoothing) Strategy: Producing a constant 57,750 cases every quarter ( $231{,}000 / 4$ ). Stabilizes labor workforce and machinery capacity, but requires substantial warehouse space and financing to carry heavy inventories into peak seasons.