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Sales are expected to increase by 10% per month. January sales are expected to be 110,000...
Sales are expected to increase by 10% per month. January sales are expected to be 110,000 units We want an ending finished goods inventory balance each month of 10% of the current month’s sales Each unit sells for $85 Each unit required 2 pounds of raw material A, and 5 grams of raw material B. Raw material A costs $11 per pound and raw material B costs $1 per gram. We want an ending raw materials inventory of 20% of the current month’s production requirement Each unit requires 10 minutes of direct labor at $17 per hour Manufacturing overhead is based on direct labor hours at $5 per hour A sales commission of $2 is paid on each unit sold. The Sales and Administrative office employs staff with salaries and wages expense of $150,000 per year, occupies a building with property tax expense of $9,600 per year and $12,000 per year in depreciation expense. Prepare the following budgets for January, February, and March: • Sales Budget • Production Budget • Direct Materials Budget • Direct Labor Budget • Manufacturing Overhead Budget • Selling and Administrative Budget
Solutions
Expert Solution
| Sollution 1 | ||||||
| Sales Budget | ||||||
| Particulars | January | February | March | |||
| Sales units | 110000 | 121000 | 133100 | |||
| Selling price per unit | $85.00 | $85.00 | $85.00 | |||
| Budgeted Sales Revenue | $9,350,000 | $10,285,000 | $11,313,500 | |||
| Solution 2 | ||||||
| Production Budget | ||||||
| Particulars | January | February | March | |||
| Sales units | 110000 | 121000 | 133100 | |||
| Add: Desired ending inventory 10% of Current month sales) | 11000 | 12100 | 13310 | |||
| Less: Opening Inventory | 0 | 11000 | 12100 | |||
| Nos of unit to be produced | 121000 | 122100 | 134310 | |||
| Solution 3 | ||||||
| Raw Material Purchase Cost Budget | ||||||
| Particulars | January | February | March | |||
| Unit to Produce | 121000 | 122100 | 134310 | |||
| Material -A (Pound) | Material -B (Grams ) | Material -A (Pound) | Material -B (Grams ) | Material -A (Pound) | Material -B (Grams ) | |
| Raw material needed per unit | 2 | 5 | 2 | 5 | 2 | 5 |
| Raw material needed for unit to produce | 242000 | 605000 | 244200 | 610500 | 268620 | 671550 |
| Add: Desired units of material in ending inventory (20% of Current month production) | 48400 | 121000 | 48840 | 122100 | 53724 | 134310 |
| Less: units of material in beginning inventory | 0 | 0 | 48400 | 121000 | 48840 | 122100 |
| Total Units of Raw material to purchased | 290400 | 726000 | 244640 | 611600 | 273504 | 683760 |
| unit cost of Raw material | $11.00 | $1.00 | $11.00 | $1.00 | $11.00 | $1.00 |
| Cost of raw material to be purchased | $3,194,400 | $726,000 | $2,691,040 | $611,600 | $3,008,544 | $683,760 |
| Sollution 4 | |||
| Budgeted labor cost budget | |||
| Particulars | January | February | March |
| Budgeted Production units | 121000 | 122100 | 134310 |
| Direct labor hours per unit(10 minutes /60minutes) | 0.167 | 0.1667 | 0.1667 |
| Budgeted direct labor hours | 20171 | 20350 | 22385 |
| direct labor cost per hour | $17 | $17 | $17 |
| Budgeted direct labor cost | $342,902 | $345,950 | $380,545 |
| Sollution 5 | |||
| Budgeted Manufacturing Overhead Budget | |||
| Particulars | January | February | March |
| Budgeted Production units | 121000 | 122100 | 134310 |
| Direct labor hours per unit(10 minutes /60minutes) | 0.167 | 0.1667 | 0.1667 |
| Budgeted direct labor hours | 20171 | 20350 | 22385 |
| Manufacturing Overhead Per Labour Hours | $5 | $5 | $5 |
| Budgeted Manufacturing Overhead Budget | $100,854 | $101,750 | $111,925 |
| Sollution 6 | |||
| Budgeted Selling and Administrative Budget | |||
| Particulars | January | February | March |
| Sale Unit | 110000 | 121000 | 133100 |
| sales commission(@2 Per Unit Sold ) | $ 220,000 | $ 242,000 |
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Month
Actual Sales
Forecast Sales
January
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10
February
11
10
March
12
10
April
14
10
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Month
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Cash receipts
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100,000
100,000
February
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90,000
March
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80,000
April
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100,000
May
180,000
120,000
June
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160,000
July
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200,000
August
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October
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November
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December
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%
Variable expenses
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Contribution margin
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