Question

Budget Problem

Part A

The ABC company manufactures bookcases that sell for $400. Budgeted sales for first months are as follows:

Month
Budgeted Sales (units)
January
1000
February
1500
March
2500
April
2000
Required
Calculate sales budget in $ for each monthand total the first quarter

Part B

Each bookcase requires 30 square feetof oak at a cost of $10 per sq foot.. the company wants to maintain an inventory of bookcases equal to 10% of the following month,s sales. Inventory on Jan 1 consisted of 80 bookcases

REQUIRED
Prepare a production budgets in units for each month and in total for the first quarter

Part C

The company wants to amintin an inventory of oak equal to 20% of the next month’s requirements. Materials inventory on Jan 1 consisted of 1100 sq feet of oak
The company estimates an inventory of oak on hand at the end of March of approximately 8000 sq feet

Required

Prepare purchases budget in $ for Direct materials for each month and in total for first quarter

Part D

Each bookcase requires 5 hr of DLH at a cost of $8.00 per hour. Variable manufacturing overhead is budgeted at $2 per DLH
Monthly fixed overhead consists of the following :

Supervisor’s salaries
$6000
Insurance
$ 2000
Depreciation of equipment
$500
Depreciation of factory
$10000

REQUIRED
Prepare a direct labour budget for each month and total the quarter
Prepare a monthly manufacturing overhead budget and total the quarter

Answer 1

PRODUCTION BUDGET
			Jan	Feb	Mar	Quarter	April
Budgeted Sales Units		1,000	1,500	2,500	5,000	2,000
Add: Desired Ending Finished inventory	150	250	200	200
Total Needs		1,150	1,750	2,700	5,200
Less: Beginning Finished Inventory	80	150	250	80
Required Production in units	1,070	1,600	2,450	5,120
RAW MATERIAL PURCHASE BUDGET
			Jan	Feb	Mar	Quarter
Budgeted Production units	1,070	1,600	2,450	5,120
RM required per unit		30	30	30	30
Total RM requiremnt		32,100	48,000	73,500	1,53,600
Add: Desired Ending Inventory	9,600	14,700	8,000	8,000
Total needs		41,700	62,700	81,500	1,61,600
Less: Beginning Inventory	1,100	9,600	14,700	1,100
Purchase Units		40,600	53,100	66,800	1,60,500
Cost price per unit		10.00	10.00	10.00	10.00
Budgeted Purchase in $	4,06,000	5,31,000	6,68,000	16,05,000
LABOUR COST BUDGETS
			Jan	Feb	Mar	Quarter
Units to be produced		1,070	1,600	2,450	5,120
Labour required per unit	5	5	5	5
Labour hours		5350	8000	12250	25600
Labuor Rate per hour	8	8	8	8
Budgeted Labour cost in $	42,800	64,000	98,000	2,04,800
Manufacturing OH budget
			Jan	Feb	Mar	Quarter
Labour hours required	5,350	8,000	12,250	25,600
Variable OH per DLH @ 2	10700	16000	24500	51200
Fixed OH
Supervisor salaries		6000	6000	6000	18000
Insurance			2000	2000	2000	6000
Depreciation on equipment	500	500	500	1500
Depreciation of factory	10000	10000	10000	30,000
Total Fixed overheads	18500	18500	18500	55500
Budgeted MFG OH cost in $	29,200	34,500	43,000	1,06,700