Question

Production, Direct Labor, Direct Materials, Sales Budgets, Budgeted Contribution Margin

Greiner Company makes and sells high-quality glare filters for microcomputer monitors. John Craven, controller, is responsible for preparing Greiner’s master budget and has assembled the following data for the coming year. The direct labor rate includes wages, all employee-related benefits, and the employer’s share of FICA. Labor saving machinery will be fully operational by March. Also, as of March 1, the company’s union contract calls for an increase in direct labor wages that is included in the direct labor rate. Greiner expects to have 6,700 glare filters in inventory on December 31 of the current year, and has a policy of carrying 25 percent of the following month’s projected sales in inventory. Information on the first four months of the coming year is as follows:

	January	February	March	April
Estimated unit sales	36,800	34,600	39,200	38,200
Sales price per unit	$81	$81	$76	$76
Direct labor hours per unit	2.80	2.80	2.50	2.50
Direct labor hourly rate	$17	$17	$19	$19
Direct materials cost per unit	$10	$10	$10	$10

Required:
Unless otherwise indicated, round all calculated amounts to the nearest dollar or unit.

1. Prepare the following monthly budgets for Greiner Company for the first quarter of the coming year.

a. Production budget in units:

Greiner Company
Production Budget (units)
For the First Quarter of the Coming Year
	January	February	March	Total
Unit sales
Desired ending inventory
Total units required
Less: Beginning inventory
Units produced

b. Direct labor budget in hours: Round your answers to two decimal places, if required.

Greiner Company
Direct Labor Budget (hours)
For the First Quarter of the Coming Year
	January	February	March	Total
Units produced
Direct labor hours per unit
Total labor budget (hours)

c. Direct materials cost budget:

Greiner Company
Direct Materials Cost Budget
For the First Quarter of the Coming Year
	January	February	March	Total
Units produced
Cost per unit	$	$	$	$
Total direct materials	$	$	$	$

d. Sales budget: Round unit selling price amounts to the nearest cent and use the same for subsequent requirements.

Greiner Company
Sales Budget (dollars)
For the First Quarter of the Coming Year
	January	February	March	Total
Unit sales
Unit selling price	$	$	$	$
Total sales revenue	$	$	$	$

2. Calculate the total budgeted contribution margin for Greiner Company by month and in total for the first quarter of the coming year. (CMA adapted)

Greiner Company
Budgeted Contribution Margin
For the First Quarter of the Coming Year
	January	February	March	Total
Sales revenue	$	$	$	$
Direct labor cost
Materials cost
Contribution margin	$	$	$	$

Answer 1

1
a.	Production budget in units:
	Greiner Company
	Production Budget (units)
	For the First Quarter of the Coming Year
				January	February	March	Total	April
	Unit sales			36800	34600	39200	110600	38200
	Desired ending inventory			8650	9800	9550
	(Next month sales*25%)			(34600*25%)	(39200*25%)	(38200*25%)
	Total units required			45450	44400	48750	138600
	Less: Beginning inventory			6700	8650	9800
	Units produced			38750	35750	38950	113450
b.	Greiner Company
	Direct Labor Budget (hours)
	For the First Quarter of the Coming Year
					January	February	March	Total
	Units produced			a	38750	35750	38950	113450
	Direct labor hours per unit			b	2.8	2.8	2.5
	Total labor budget (hours)			a*b	108500	100100	97375	305975
c.	Greiner Company
	Direct Materials Cost Budget
	For the First Quarter of the Coming Year
					January	February	March	Total
	Units produced			a	38750	35750	38950	113450
	Cost per unit			b	10	10	10
	Total direct materials			a*b	387500	357500	389500	1134500
d.	Greiner Company
	Sales Budget (dollars)
	For the First Quarter of the Coming Year
					January	February	March	Total
	Unit sales			a	36800	34600	39200	110600
	Unit selling price			b	81	81	76
	Total sales revenue			a*b	2980800	2802600	2979200	8762600
2	Greiner Company
	Budgeted Contribution Margin
	For the First Quarter of the Coming Year
					January	February	March	Total
	Sales revenue			a	2980800	2802600	2979200	8762600
	Direct labor cost		(Note:1)	b	1844500	1701700	1850125	5396325
	Materials cost			c	387500	357500	389500	1134500
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