Question

ales, Production, Direct Materials Purchases, and Direct Labor Cost Budgets

The budget director of Gourmet Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for July is summarized as follows:

a. Estimated sales for July by sales territory:

Maine:
Backyard Chef	310 units at $700 per unit
Master Chef	150 units at $1,200 per unit
Vermont:
Backyard Chef	240 units at $750 per unit
Master Chef	110 units at $1,300 per unit
New Hampshire:
Backyard Chef	360 units at $750 per unit
Master Chef	180 units at $1,400 per unit

b. Estimated inventories at July 1:

Direct materials:
Grates	290 units
Stainless steel	1,500 lbs.
Burner subassemblies	170 units
Shelves	340 units
Finished products:
Backyard Chef	30 units
Master Chef	32 units

c. Desired inventories at July 31:

Direct materials:
Grates	340 units
Stainless steel	1,800 lbs.
Burner subassemblies	155 units
Shelves	315 units
Finished products:
Backyard Chef	40 units
Master Chef	22 units

d. Direct materials used in production:

In manufacture of Backyard Chef:
Grates	3 units per unit of product
Stainless steel	24 lbs. per unit of product
Burner subassemblies	2 units per unit of product
Shelves	4 units per unit of product
In manufacture of Master Chef:
Grates	6 units per unit of product
Stainless steel	42 lbs. per unit of product
Burner subassemblies	4 units per unit of product
Shelves	5 units per unit of product

e. Anticipated purchase price for direct materials:

Grates	$15 per unit
Stainless steel	$6 per lb.
Burner subassemblies	$110 per unit
Shelves	$10 per unit

f. Direct labor requirements:

Backyard Chef:
Stamping Department	0.50 hr. at $17 per hr.
Forming Department	0.60 hr. at $15 per hr.
Assembly Department	1.00 hr. at $14 per hr.
Master Chef:
Stamping Department	0.60 hr. at $17 per hr.
Forming Department	0.80 hr. at $15 per hr.
Assembly Department	1.50 hrs. at $14 per hr.

Required:

1. Prepare a sales budget for July.

Gourmet Grill Company Sales Budget For the Month Ending July 31
Product and Area		Unit Sales Volume	Unit Selling Price	Total Sales
Backyard Chef:
	Maine		$	$
	Vermont
	New Hampshire
	Total			$
Master Chef:
	Maine		$	$
	Vermont
	New Hampshire
	Total			$
Total revenue from sales				$

2. Prepare a production budget for July. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Gourmet Grill Company Production Budget For the Month Ending July 31
	Units
	Backyard Chef	Master Chef
Expected units to be sold
Desired inventory, July 31
Total units available
Estimated inventory, July 1
Total units to be produced

3. Prepare a direct materials purchases budget for July. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Gourmet Grill Company Direct Materials Purchases Budget For the Month Ending July 31
	Grates (units)	Stainless Steel (lbs.)	Burner Sub- assemblies (units)	Shelves (units)	Total
Required units for production:
Backyard Chef
Master Chef
Desired inventory, July 31
Total
Estimated inventory, July 1
Total units to be purchased
Unit price	$	$	$	$
Total direct materials to be purchased	$	$	$	$	$

4. Prepare a direct labor cost budget for July.

Gourmet Grill Company Direct Labor Cost Budget For the Month Ending July 31
			Stamping Department		Forming Department		Assembly Department	Total
Hours required for production:
	Backyard Chef
	Master Chef
	Total
Hourly rate			$		$		$
Total direct labor cost			$		$		$	$

Feedback

Remember to take into account expected units to be sold, desired units in ending inventory and estimated units in beginning inventory when calculating total units to be produced.

Once sales quantities are estimated, the expected sales revenue can be determined.

Remember to take into account materials required for production, desired ending materials inventory and estimated beginning materials inventory when calculating direct materials to be purchased.

Learning Objective 4.

Answer 1

1.

Gourmet Grill Company
Sales Budget
For the Month Ending July 31
Product and Area	Unit Sales Volume	Unit Selling Price	Total Sales
Backyard Chef:
Maine	310	700	217000
Vermont	240	750	180000
New Hampshire	360	750	270000
Total	910		667000
Master Chef:
Maine	150	1200	180000
Vermont	110	1300	143000
New Hampshire	180	1400	252000
Total	440		575000
Total revenue from sales $			1242000

2.

Gourmet Grill Company
Production Budget
For the Month Ending July 31
	Units
	Backyard Chef	Master Chef
Expected units to be sold	910	440
Desired inventory, July 31	40	22
Total units available	950	462
Estimated inventory, July 1	30	32
Total units to be produced	920	430

3.

Gourmet Grill Company
Direct Materials Purchases Budget
For the Month Ending July 31
	Grates (units)	Stainless Steel (lbs.)	Burner Sub-assemblies (units)	Shelves (units)	Total
Required units for production:
Backyard Chef	2760	22080	1840	3680
Master Chef	2580	18060	1720	2150
Desired inventory, July 31	340	1800	155	315
Total	5680	41940	3715	6145
Estimated inventory, July 1	290	1500	170	340
Total units to be purchased	5390	40440	3545	5805
Unit price $	15	6	110	10
Total direct materials to be purchased $	80850	242640	389950	58050	771490

4.

Gourmet Grill Company
Direct Labor Cost Budget
For the Month Ending July 31
	Stamping Department	Forming Department	Assembly Department	Total
Hours required for production:
Backyard Chef	460	552	920
Master Chef	258	344	645
Total	718	896	1565
Hourly rate $	17	15	14
Total direct labor cost $	12206	13440	21910	47556