Question

Sales, Production, Direct Materials Purchases, and Direct Labor Cost Budgets

The budget director of Gourmet Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for March is summarized as follows:

a. Estimated sales for March by sales territory:

Maine:
Backyard Chef	350 units at $800 per unit
Master Chef	200 units at $1,400 per unit
Vermont:
Backyard Chef	400 units at $825 per unit
Master Chef	240 units at $1,500 per unit
New Hampshire:
Backyard Chef	320 units at $850 per unit
Master Chef	200 units at $1,600 per unit

b. Estimated inventories at March 1:

Direct materials:
Grates	320 units
Stainless steel	1,700 lb.
Burner subassemblies	190 units
Shelves	350 units
Finished products:
Backyard Chef	30 units
Master Chef	36 units

c. Desired inventories at March 31:

Direct materials:
Grates	300 units
Stainless steel	1,500 lb.
Burner subassemblies	210 units
Shelves	400 units
Finished products:
Backyard Chef	40 units
Master Chef	26 units

d. Direct materials used in production:

In manufacture of Backyard Chef:
Grates	3 units per unit of product
Stainless steel	24 lb. per unit of product
Burner subassemblies	2 units per unit of product
Shelves	4 units per unit of product
In manufacture of Master Chef:
Grates	6 units per unit of product
Stainless steel	42 lb. per unit of product
Burner subassemblies	4 units per unit of product
Shelves	5 units per unit of product

e. Anticipated purchase price for direct materials:

Grates	$16 per unit
Stainless steel	$8 per lb.
Burner subassemblies	$120 per unit
Shelves	$12 per unit

f. Direct labor requirements:

Backyard Chef:
Stamping Department	0.50 hr. at $18 per hr.
Forming Department	0.60 hr. at $16 per hr.
Assembly Department	1.0 hr. at $15 per hr.
Master Chef:
Stamping Department	0.60 hr. at $18 per hr.
Forming Department	0.80 hr. at $16 per hr.
Assembly Department	1.50 hrs. at $15 per hr.

Required:

1. Prepare a sales budget for March.

Gourmet Grill Company Sales Budget For the Month Ending March 31
Product and Area		Unit Sales Volume	Unit Selling Price	Total Sales
Backyard Chef:
	Maine
	Vermont
	New Hampshire
	Total
Master Chef:
	Maine
	Vermont
	New Hampshire
	Total
Total revenue from sales

2. Prepare a production budget for March.

Gourmet Grill Company Production Budget For the Month Ending March 31
	Units
	Backyard Chef	Master Chef
Expected units to be sold
Plus desired inventory, March 31
Total
Less estimated inventory, March 1
Total units to be produced

3. Prepare a direct materials purchases budget for March.

Gourmet Grill Company Direct Materials Purchases Budget For the Month Ending March 31
	Grates (units)	Stainless Steel (lb.)	Burner Sub- assemblies (units)	Shelves (units)	Total
Required units for production:
Backyard Chef
Master Chef
Plus desired inventory, March 31
Total
Less estimated inventory, March 1
Total units to be purchased
Unit price
Total direct materials to be purchased

4. Prepare a direct labor cost budget for March.

Gourmet Grill Company Direct Labor Cost Budget For the Month Ending March 31
			Stamping Department		Forming Department		Assembly Department	Total
Hours required for production:
	Backyard Chef
	Master Chef
	Total
Hourly rate			$		$		$
Total direct labor cost			$		$		$	$

Answer 1

Sales Budget
Product and Area		Unit Sales	Unit Selling	Total Sales
		Volume	Price
Backyard Chef:
	Maine	350	$800	$2,80,000
	Vermont	400	$825	$3,30,000
	New Hampshire	320	$850	$2,72,000
	Total	1070		$8,82,000
Master Chef:
	Maine	200	$1,400	$2,80,000
	Vermont	240	$1,500	$      143,000
	New Hampshire	200	$1,600	$      252,000
	Total	640		$2,80,000
Total revenue from sales				$11,62,000

2. Prepare a production budget
	Units
	Backyard Chef	Master Chef
Expected units to be sold	1070	640
Plus desired inventory, March 31,	40	26
Total	1110	666
Less estimated inventory, March 1,	30	36
Total units to be produced	1080	630

3. Prepare a direct materials purchases budget .
	Grates	Stainless Steel	Burner Sub-	Shelves	Total
	(units)	(lbs.)	assemblies	(units)
			(units)
Required units for production:
Backyard Chef	3,240	25,920	2,160	4,320
Master Chef	3,780	26,460	2,520	3,150
Plus desired inventory, Ending	320	1,700	190	350
Total	7,340	54,080	4,870	7,820
Less estimated inventory, Beginning	300	1,500	210	400
Total units to be purchased	7,040	52,580	4,660	7,420
Unit price	$16	$8	$120	$12
Total direct materials to be purchased	$1,12,640	$4,20,640	$5,59,200	$89,040	$11,81,520

4. Prepare a direct labor cost budget
		Stamping Department	Forming Department	Assembly Department	Total
Hours required for production:
	Backyard Chef	540	648	1080
	Master Chef	378	504	945
	Total	918	1152	2025	4095
Hourly rate		$18	$16	$15
Total direct labor cost		$16,524	$18,432	$30,375	$65,331

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