Question

Q3: Problems:

Problem 1

Viola Enterprises is a manufacturer that produces violins for established professional musicians. Ed Johnson, the company’s sales manager, prepared the following sales forecast for 2011:

Sales Price	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
$600	600	500	600	600

The sales price of violins is expected to increase by 6% per quarter to cover expected increases in raw material costs.

Required

Prepare Viola’s sales budget for 2011 for violins.

Problem 2

Viola Enterprises is a manufacturer that produces violins for amateur, rising, and established professional musicians. Ed Johnson, the company’s sales manager, prepared the following sales forecast for violins for the four quarters of 2011 and the first quarter of 2012:

Sales Price	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	1st Quarter
$600	600	500	600	600	450

On December 31, 2010, Viola had 80 violins in stock–fewer than the desired inventory level of 20% of the next quarter’s sales.

Required

Prepare Viola’s production budget for violins for 2011.

Problem 3

Viola Enterprises is a manufacturer that produces both violins and cellos for amateur, rising, and established professional musicians. Each cello requires a spruce top, which Viola purchases for $400 each. On December 31, 2010, Viola had 40spruce tops in inventory. Spoilage during the production process results in a standard quantity of 1.2spruce tops per cello. Viola wants to maintain an ending inventory of spruce tops equal to 20% of the following quarter’s production needs rounded to the nearest whole unit. The first quarter of 2012 has been budgeted at 140 cellos to be produced. Sales and production needs appear below:

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Annual
Budgeted unit sales	200	80	100	120	500
Budgeted production	184	86	106	234	610

Required

Prepare the purchases budget for spruce tops for 2011.

Problem 4

Batmania, Inc plans to sell 1,195 baseball bats with production scheduled at 1,200 bats during July. Each bat requires 3 board feet of birch and 0.60 hours of direct labor. Birch costs $2.20 per board foot and employees of the company are paid $12.50 per hour. Batmania has 210 board feet of birch and 25 bats in beginning inventory, and plans to have 240 board of birch and 30 bats in ending inventory for the month.

Required

Calculate budgeted direct labor for July.

Answer 1

PROBLEM 1

SALES BUDGET

( for the year ending 2011)

Quarter units Rate ($)    Amount($)

1 600 600 360000

2 500 636 318000

3 600 674.16 404496

4 600 714.6096 428765.76

Total 2300 1511261.76

PROBLEM 2 Production Budget ( in units)

( for the year ending 31st december 2011)

    Q1    Q2 Q3 Q4

Budegeted sales(units) 600 500 600 600

Add: Closing stock    100   120 120 120

Less : Opening Stock 80 100 120 120

620 520 600 600

note: closing stock has been calculated on the assumption that a desired level of 20% has to be maintained as closing stock of next quarter sales

Closing stock of Q4 has been calculated assuming budegeted sales for Q1 of 2012 is same as Q1 of 2011

PROBLEM 3 Purchases Budget

( for the year ending 31st december 2011)

Q1 Q2 Q3 Q4

Budgeted production 184 86   106   234

Spruce requirement as per production 221 103. 127.    281

Add: closing stock (next quarters prod needs) 21        26 56 34

less : opening stock     40 21 26 56        spruce needed 202 108 157 259

rate @ $400 80800 43200 62800 103600

PROBLEM 4

Budegeted direct labour

for the month ending 31st july

units to be produced 1200

less : opening stock 25

Add: closing stock    30

net units 1205 units

birch required to produce (1205*.3) 3615 birch

add :closing 240 birch

less: opening inventory 210 birch

net birch required 3645 birch

  

work done on 1 hr = 3/0.60 + 5 feet of birch

work to be done on (3645+210)= 3855 birch = 3855/5 =771 hours is required

labour rate =771*12.50 per hour= $9637.50