Question

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

The budget director of Royal British Furniture 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 of William and Kate chairs for March by sales territory:

Eastern Domestic:
	William	7,500 units at $800 per unit
	Kate	6,000 units at $650 per unit
Western Domestic:
	William	6,000 units at $700 per unit
	Kate	5,000 units at $550 per unit
International:
	William	2,500 units at $600 per unit
	Kate	1,000 units at $350 per unit

b. Estimated inventories at March 1:

Direct materials:				Finished products:
Fabric		5,500	sq. yds.	William	1,500	units
Wood		13,700	lineal ft.	Kate	300	units
Filler		3,800	cu. ft.
Springs		3,500	units

c. Desired inventories at March 31:

Direct materials:				Finished products:
Fabric		9,000	sq. yds.	William	2,000	units
Wood		20,000	lineal ft.	Kate	900	units
Filler		5,000	cu. ft.
Springs		7,500	units

d. Direct materials used in production:

In manufacture of William:
Fabric		4.0	sq. yds. per unit of product
Wood		16	lineal ft. per unit of product
Filler		3.8	cu. ft. per unit of product
Springs		14	units per unit of product
In manufacture of Kate:
Fabric		2.5	sq. yds. per unit of product
Wood		12	lineal ft. per unit of product
Filler		3.2	cu. ft. per unit of product
Springs		10	units per unit of product

e. Anticipated purchase price for direct materials:

Fabric		$9.00	per sq. yd.		Filler		$1.50	per cu. ft.
Wood		5.00	per lineal ft.		Springs		2.00	per unit

f. Direct labor requirements:

William:
Framing Department		2.5 hrs. at $15 per hr
Cutting Department		1.0 hr. at $12 per hr.
Upholstery Department		3.0 hrs. at $16 per hr.
Kate:
Framing Department		1.5 hrs. at $15 per hr.
Cutting Department		0.5 hr. at $12 per hr.
Upholstery Department		2.0 hrs. at $16 per hr.

Required:

1. Prepare a sales budget for March.

Royal British Furniture Company
Sales Budget
For the Month Ending March 31
Product and Area	Unit Sales Volume	Unit Selling Price	Total Sales
William:
Eastern Domestic		$	$
Western Domestic
International
Total			$
Kate:
Eastern Domestic		$	$
Western Domestic
International
Total			$
Total revenue from sales			$

2. Prepare a production budget for March.

Royal British Furniture Company
Production Budget
For the Month Ending March 31
	William Units	Kate Units
Expected units to be sold
Total
Total units to be produced

3. Prepare a direct materials purchases budget for March.

Royal British Furniture Company
Direct Materials Purchases Budget
For the Month Ending March 31
	Fabric (sq. yds.)	Wood (lineal ft.)	Filler (cu. ft.)	Springs (units)	Total
Required units for production:
William
Kate
Total
Total units to be purchased
Unit price	$	$	$	$
Total direct materials to be purchased	$	$	$	$	$

4. Prepare a direct labor cost budget for March.

Royal British Furniture Company
Direct Labor Cost Budget
For the Month Ending March 31
	Framing Department	Cutting Department	Upholstery Department	Total
Hours required for production:
William
Kate
Total
Hourly rate	$	$	$
Total direct labor cost	$	$	$	$

Answer 1

1) Sales budget for the company is shown as follows:-   

Royal British Furniture Company
Sales Budget
For the Month Ending March 31
Product and Area	Unit Sales Volume (A)	Unit Selling Price (B)	Total Sales (A*B)
William:
Eastern Domestic	7,500 units	$800	$6,000,000
Western Domestic	6,000 units	$700	$4,200,000
International	2,500 units	$600	$1,500,000
Total (i)	16,000 units		$11,700,000
Kate:
Eastern Domestic	6,000 units	$650	$3,900,000
Western Domestic	5,000 units	$550	$2,750,000
International	1,000 units	$350	$350,000
Total (ii)	12,000 units		$7,000,000
Total revenue from sales (i+ii)			$18,700,000

2) Production Budget for March is shown as follows

Royal British Furniture Company
Production Budget
For the Month Ending March 31
	William Units	Kate Units
Expected units to be sold	16,000	12,000
Add: Desired Inventories at March 31	2,000	900
Total	18,000	12,900
Less: Inventories at March 1	1,500	300
Total units to be produced	16,500	12,600

3) Direct Materials Purchase Budget for March is shown as follows:-   

Royal British Furniture Company
Direct Materials Purchases Budget
For the Month Ending March 31
	Fabric (sq. yds.)	Wood (lineal ft.)	Filler (cu. ft.)	Springs (units)	Total
Required units for production:
William	66,000 (16,500*4)	264,000 (16,500*16)	62,700 (16,500*3.8)	231,000 (16,500*14)
Kate	31,500 (12,600*2.5)	151,200 (12,600*12)	40,320 (12,600*3.2)	126,000 (12,600*10)
Add: Desired Inventories at Mar 31	9,000	20,000	5,000	7,500
Total	106,500	435,200	108,020	364,500
Less: Inventories at Mar 1	5,500	13,700	3,800	3,500
Total units to be purchased (a)	101,000	421,500	104,220	361,000
Unit price (b)	$9.00	$5.00	$1.50	$2.00
Total direct materials to be purchased (a*b)	$909,000	$2,107,500	$156,330	$722,000	$3,894,830

4. Direct labor cost budget for March is shown as follows:- (Amounts in $)

Royal British Furniture Company
Direct Labor Cost Budget
For the Month Ending March 31
	Framing Department	Cutting Department	Upholstery Department	Total
Hours required for production:
William (A)	41,250 (16,500*2.5 hrs)	16,500 (16,500*1 hr)	49,500 (16,500*3 hrs)
Kate (B)	18,900 (12,600*1.5 hrs)	6,300 (12,600*0.5 hr)	25,200 (12,600*2 hrs)
Total (C = A+B)	60,150 hrs	22,800 hrs	74,700 hrs
Hourly rate (D)	$15 per hr	$12 per hr	$16 per hr
Total direct labor cost (C*D)	$902,250	$273,600	$1,195,200	$2,371,050