Question

Sales, 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

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			$		$		$	$

Answer 1

Solution:-
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	310	700	217,000
Vermont	240	750	180,000
New Hampshire	360	750	270,000
Total	910		667,000
Master Chef:
Maine	150	1,200	180,000
Vermont	110	1,300	143,000
New Hampshire	180	1,400	252,000
Total	440		575000
Total revenue from sales	1,350		1,242,000
2. Prepare a production budget for July:-
Gourmet Grill Company
Production Budget
For the Month Ending July 31,
	Units
	Backyard Chef	Master Chef
Expected units to be sold	910	440
Plus desired inventory, July 31,	40	22
Total	950	462
Less estimated inventory, July 1,	-30	-32
Total units to be produced	920	430
3. Prepare a direct materials purchases budget for March:-
Gourmet Grill Company
Direct Materials Purchases Budget
For the Month Ending July 31,
	Grates	Stainless Steel	Burner Sub-	Shelves	Total
	(units)	(lbs.)	assemblies	(units)
			(units)
Required units for production:
Backyard Chef	2,760	22,080	1,840	3,680	30,360
Master Chef	2,580	18,060	1,720	2,150	24,510
Plus desired inventory, July 31,	340	1,800	155	315	2,610
Total	5,680	41,940	3,715	6,145	57,480
Less estimated inventory, July 1,	290	1,500	170	340	2,300
Total units to be purchased	5,390	40,440	3,545	5,805	55,180
Unit price	15	6	110	10
Total direct materials to be purchased	80,850	242,640	389,950	58,050	771,490
4. Prepare a direct labor cost budget for July:-
Gourmet Grill Company
Direct Labor Cost Budget
For the Month Ending July 31,
	Stamping	Forming Department	Assembly Department	Total
	Department
Hours required for production:
Backyard Chef	460	552	920	1,932
Master Chef	258	344	645	1,247
Total	718	896	1565	3179
Hourly rate	17	15	14
Total direct labor cost	12,206	13,440	21,910	47,556