Question

Westport Company is preparing its master budget for May. Use the estimates provided to determine the amounts necessary for each of the following requirements. (Estimates may be related to more than one requirement.)

a. What should total sales revenue be if territories E and W estimate sales of 50,000 and 100,000 units, respectively, and the unit selling price is $65?
$Answer

b. If the beginning finished goods inventory is an estimated 6,000 units and the desired ending inventory is 11,000 units, how many units should be produced?
Answer units

c. What dollar amount of materials should be purchased at $5.50 per pound if each unit of product requires 2.5 pounds and beginning and ending materials inventories should be 12,000 and 13,500 pounds, respectively.
$Answer

d. How much direct labor cost should be incurred if each unit produced requires 0.5 hours at an hourly rate of $22?
$Answer

e. How much manufacturing overhead should be incurred if fixed manufacturing overhead is $45,000 and variable manufacturing overhead is $5 per direct labor hour?
$Answer

Answer 1

Ans. A	Sales Budget
	Particulars	E	F	Total
	Budgeted unit sales	50000	100000	150000
	(*) Selling price per unit	$65	$65	$65
	Total sales	$3,250,000	$6,500,000	$9,750,000
Ans. B	Production Budget
	Particulars	May
	Total sales units	150,000
	Add: Desired Ending inventory	11000
	Total needs	161,000
	Less: Beginning inventory	-6000
	Units to be produced	155,000
Ans. C	Direct Materials Budget
	Particulars	May
	Budgeted production (units)	155000
	(X) Materials requirement per unit	2.5
	Materials needed for production	387500
	Add: budgeted ending inventory	13500
	Total materials requirements	401000
	Less: Budgeted beginning inventory	-12000
	Materials to be purchased	389000
	(X) Direct materials per unit	$5.50
	Total cost of direct materials	$2,139,500
Ans. D	Direct Labor Budget
	Particulars	May
	Budgeted production (units)	155000
	(X) Direct labor hours	0.5
	Total labor hours needed	77500
	(X) Wages rate per hour	$22
	Budget direct labor cost	$1,705,000
Ans. E	Manufacturing Overhead Budget
	Particulars	May
	Total labor hours needed	77500
	(X) Variable overhead rate	$5.00
	Budgeted variable overhead   (a)	$387,500
	Budgeted fixed overhead   (b)	$45,000
	Budgeted total overhead (a+b)	$432,500