Question

1. Sales, Production, Direct Materials Purchases, and Direct Labor Cost Budgets

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

   a. Estimated sales of King and Prince chairs for February by sales territory:

   Northern Domestic:
   King	610 units at $780 per unit
   Prince	750 units at $550 per unit
   Southern Domestic:
   King	340 units at $780 per unit
   Prince	440 units at $550 per unit
   International:
   King	360 units at $850 per unit
   Prince	290 units at $600 per unit

   b. Estimated inventories at February 1:

   Direct materials:
   Fabric	420 sq. yds.
   Wood	580 linear ft.
   Filler	250 cu. ft.
   Springs	660 units
   Finished products:
   King	90 units
   Prince	25 units

   c. Desired inventories at February 28:

   Direct materials:
   Fabric	390 sq. yds.
   Wood	650 linear ft.
   Filler	300 cu. ft.
   Springs	540 units
   Finished products:
   King	80 units
   Prince	35 units

   d. Direct materials used in production:

   In manufacture of King:
   Fabric	6.0 sq. yds. per unit of product
   Wood	38 linear ft. per unit of product
   Filler	4.2 cu. ft. per unit of product
   Springs	16 units per unit of product
   In manufacture of Prince:
   Fabric	4.0 sq. yds. per unit of product
   Wood	26 linear ft. per unit of product
   Filler	3.4 cu. ft. per unit of product
   Springs	12 units per unit of product

   e. Anticipated purchase price for direct materials:

   Fabric	$12.00	per sq. yd.
   Wood	7.00	per linear ft.
   Filler	$3.00	per cu. ft.
   Springs	4.50	per unit

   f. Direct labor requirements:

   King:
   Framing Department	1.2 hrs. at $12 per hr.
   Cutting Department	0.5 hr. at $14 per hr.
   Upholstery Department	0.8 hr. at $15 per hr.
   Prince:
   Framing Department	1.0 hr. at $12 per hr.
   Cutting Department	0.4 hr. at $14 per hr.
   Upholstery Department	0.6 hr. at $15 per hr.

   Required:

   1. Prepare a sales budget for February.

   Royal Furniture Company Sales Budget For the Month Ending February 28
   Product and Area		Unit Sales Volume	Unit Selling Price	Total Sales
   King:
   	Northern Domestic
   	Southern Domestic
   	International
   	Total
   Prince:
   	Northern Domestic
   	Southern Domestic
   	International
   	Total
   Total revenue from sales

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

   Royal Furniture Company Production Budget For the Month Ending February 28
   	Units
   	King	Prince

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

   Royal Furniture Company Direct Materials Purchases Budget For the Month Ending February 28
   	Direct Materials
   		Fabric (sq. yds.)		Wood (linear ft.)		Filler (cu. ft.)		Springs (units)	Total
   Required units for production:
   King
   Prince
   Desired inventory, February 28
   Total
   Estimated inventory, February 1
   Total units to be purchased
   Unit price
   Total direct materials to be purchased

   4. Prepare a direct labor cost budget for February.

   Royal Furniture Company Direct Labor Cost Budget For the Month Ending February 28
   			Framing Department		Cutting Department		Upholstery Department	Total
   Hours required for production:
   	King
   	Prince
   	Total
   Hourly rate
   Total direct labor cost

Check My Work

Answer 1

1. Sales budget for Feb.
Product and area	Unit Sales Volume	Unit Selling Price	Total Sales
King:
Northern Domestic	610	780	475800
Southern Domestic	340	780	265200
International	360	850	306000
Total	1310		1047000
Prince:
Northern Domestic	750	550	412500
Southern Domestic	440	550	242000
International	290	600	174000
Total	1480		828500
Total revenue from sales			1875500
2. Production Budget for Feb. :
	Units	Units
	King	Prince
Sales	1310	1480
add:Closing Stock	80	35
Total required	1390	1515
less:Opening Stock	-90	-25
Production required	1300	1490
3. Direct Materials Purchases Budget for Feb:
	Direct Materials
	Fabric sq yd	Wood linear ft.	Filler cu.ft.	Springs units	Total
Req. units for production
King	1300*6=7800	49400	5460	7800
Price	1490*4=5960	38740	5066	17880
Desired inventory, feb 28	390	650	300	540
Total	14150	88790	10826	26220
less: Estimated Inventory, feb 1	420	580	250	660
Total units to be purchased	13730	88210	10576	25560
Unit Price	12	7	3	4.5
Total direct materials to be purchased	164760	617470	31728	115020	928978
4. Direct Labor Cost Budget for Feb.
	Framing Dept	Cutting Dept	Upholstery Dept	Total
Hours required for production
King	1300*1.2=1560	1300*0.5=650	1300*0.8=1040
Prince	1490*1=1490	1490*0.4=596	1490*0.6=894
Total	3050	1246	1934
Hourly rate	12	14	15
Total direct labor cost	36600	17444	29010	83054