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In: Accounting

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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