Question

Thunder Creek Company is preparing budgets for the first quarter of 2018.

#1 Create a sales budget.

Thunder Creek Company expects sales of 18,000 units in January 2018, 24,000 units in February, 30,000 units in March, 34,000 in April, and 36,000 in May. The sales price is $48 per unit.

#2 Create a production budget.

Thunder Creek wants to finish each month with 20% of next month's sales in units.

#3 Create a Direct Materials Budget

Thunder Creek Company uses 2 pounds of direct materials for each unit it produces, at a cost of $4.00 per pound. The company begins the year with 9,500 pounds of material in Raw Materials Inventory. Management desires an ending inventory of 25% of next month's materials requirements

#4 Create a Direct Labor Budget

Thunder Creek Company's workers require 30 minutes of labor to produce each unit of product. The labor cost is $20 per hour

Budget #5: Create a Manufacturing Overhead Budget

1. Thunder Creek Company prepares its Manufacturing Overhead Budget. For each direct labor hour, the variable overhead costs are:
Indirect Materials = $1.00 per DLH; Indirect Labor Cost = $1.30 per DLH; Maintenance = $1.20 per DLH

2. The Fixed Overhead Costs per month are: Salaries of $40,000, Depreciation =$20,000 and Maintenance = $10,000.

3. ROUND the predetermined overhead allocation rate to two decimal places. Manufacturing overhead is allocated using direct labor hours.

Budget #6: Create a Cost of Goods Sold Budget. Thunder Creek Company uses the first-in, first-out (FIFO) inventory costing method.

The Beginning Finished Goods Inventory is $86,400 consisting of 3,600 units.

Budget #7: Selling and Administrative Expense Budget

Thunder Creek Company's variable supplies expense per month is $3.00 per unit. The fixed selling and administrative expenses per month consist of Salaries: $245,000; Advertising: $30,000; and Depreciation: $28,000

Answer 1