Question

School Days Furniture, Inc., manufactures a variety of desks, chairs, tables, and shelf units which are sold to public school systems throughout the midwest. The controller of the company’s Desk Division is currently preparing a budget for the third quarter of the year. The following sales forecast has been made by the division’s sales manager.

July	5,000	desk-and-chair sets
August	6,000	desk-and-chair sets
September	7,500	desk-and-chair sets

Each desk-and-chair set requires 10 board feet of pine planks and 1.5 hours of direct labor. Each set sells for $60. Pine planks cost $0.60 per board foot, and the division ends each month with enough wood to cover 10 percent of the next month’s production requirements. The division incurs a cost of $21.00 per hour for direct-labor wages and fringe benefits. The division ends each month with enough finished-goods inventory to cover 20 percent of the next month’s sales.

  

Required:

Complete the following budget schedules

1.	Sales budget:

	July August September Sales (in sets) Sales price per set Sales revenue $0 $0 $0

2.	Production budget (in sets):

   

	July August September Sales Add: Desired ending inventory 1,500 Total requirements 0 0 1,500 Less: Projected beginning inventory Planned production 0 0 1,500

3.	Raw material purchases:

July August September Planned production (sets) Raw material required per set (board feet) Raw material required for production (board feet) 0 0 0 Add: Desired ending inventory of raw material, in board feet (10% of next month’s requirement) 8,000 Total requirements 0 0 8,000 Less: Projected beginning inventory of raw material, in board feet (10% of current month’s requirement) Planned purchases of raw material (board feet) 0 0 8,000 Cost per board foot Planned purchases of raw material (dollars) $0 $0 $0

4. Direct-labor budget

	July August September Planned production (sets) Direct-labor hours per set Direct-labor hours required 0 0 0 Cost per hour Planned direct-labor cost $0 0 0

Answer 1

Solution 1:

School Days Furniture Inc.
Sales Budget
	July	August	September
Sales (in sets)	5000	6000	7500
Sales price per set	$60	$60	$60
Sales revenue	$3,00,000	$3,60,000	$4,50,000

Solution 2:

School Days Furniture Inc.
Production Budget (in sets)
	July	August	September
Sales	5000	6000	7500
Add: Desired ending inventory	1200	1500	1500
Total requirements	6200	7500	9000
Less: Projected beginning inventory	1000	1200	1500
Planned production	5200	6300	7500

Solution 3:

School Days Furniture Inc.
Raw Material Purchases
	July	August	September
Planned production (sets)	5200	6300	7500
Raw material required per set (board feet)	10	10	10
Raw material required for production (board feet)	52000	63000	75000
Add: Desired ending inventory of raw material, in board feet (10% of next month’s requirement)	6300	7500	8000
Total requirements	58300	70500	83000
Less: Projected beginning inventory of raw material, in board feet (10% of current month’s requirement)	5200	6300	7500
Planned purchases of raw material (board feet)	53100	64200	75500
Cost per board foot	$0.60	$0.60	$0.60
Planned purchases of raw material (dollars)	$31,860	$38,520	$45,300

Solution 4:

School Days Furniture Inc.
Direct Labor Budget
	July	August	September
Planned production (sets)	5200	6300	7500
Direct-labor hours per set	1.5	1.5	1.5
Direct-labor hours required	7800	9450	11250
Cost per hour	$21	$21	$21
Planned direct-labor cost	$1,63,800	$1,98,450	$2,36,250