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

Ans 1)

Sales Budget of Gourmet Grill Company for the month ending, March 31

Product & Area	Unit Sales Volume	Units Selling Price	Total Sales
Backyard Chef :
Maine	350 Units	$800	$2,80,000 (350 Units*$800)
Vermont	400 Units	$825	$3,30,000 (400 Units*$825)
New Hampshire	320 Units	$850	$2,72,000 (320 Units*$850)
Total…(A)	1,070 Units (350 Units + 400 Units + 320 Units)		$8,82,000 ($2,80,000 + $3,30,000 + $2,72,000)
Master Chef :
Maine	200 Units	$1,400	$2,80,000 (200 Units*$1,400)
Vermont	240 Units	$1,500	$3,60,000 (240 Units*$1,500)
New Hampshire	200 Units	$1,600	$3,20,000 (200 Units*$1,600)
Total…(B)	640 Units (200 Units + 240 Units + 200 Units)		$9,60,000 ($2,80,000 + $3,60,000 +$3,20,000)
Total Revenue from Sales…(C)=(A)+(B)	1,710 Units		$18,42,000 ($8,82,000 + $9,60,000)

Ans 2)

Production Budget of Gourmet Grill Company for the month ending, March 31(in Units)

Particulars	Backyard Chef	Master Chef
Expected Units to be Sold…(A)	1,070 Units	640 Units
Add) Desired Inventory, March 31….(B)	40 Units	26 Units
Total…(C)=(A)+(B)	1,110 Units (1,070 Units + 40 Units)	666 Units (640 Units + 26 Units)
Less) Estimated Inventory March 1….(D)	30 Units	36 Units
Total Units to be produced...(E)=(C)-(D)	1,080 Units (1,110 Units – 30 Units)	630 Units (666 Units – 36 Units)

Ans 3)

Direct Material Purchases Budget of Gourmet Grill Company for the month ending, March 31

	Grates	Stainless Steel	Burner Subassemblies	Shelves	Total
Required Units for Production
Backyard Chef	3,240 Units (1,080 Units of Backyard chef*3 Units of Grates)	25,920 lb (1,080 Units of Backyard chef*24 Lb of Stainless steel)	2,160 Units (1,080 Units of Backyard chef*2 Units of Burner Subassemblies)	4,320 Units (1,080 Units of Backyard chef*4 Units of Shelves)
Master Chef	3,780 Units (630 Units of Master chef*6 Units of Grates)	26,460 lb (630 Units of Master chef*42 Lb of Stainless Steel)	2,520 Units (630 Units of Master chef*4 Units of Burner Assemblies)	3,150 Units (630 Units of Master chef*5 Units of Shelves)
Total Units Required for Production…(A)	7,020 Units (3,240 Units + 3,780 Units)	52,380 lb (25,920 lb + 26,460 lb)	4,680 Units (2,160 Units + 2,520 Units)	7,470 Units (4,320 Units + 3,150 Units)
Add) Desired Inventory, March 31 ….(B)	300 Units	1,500 lb	210 Units	400 Units
Total….(C)=(A)+(B)	7,320 Units (7,020 Units + 300 Units)	53,880 lb (52,380 lb + 1,500 lb)	4,890 Units (4,680 Units + 210 Units)	7,870 Units (7,470 Units + 400 Units)
Less) Estimated Inventory, March 1….(D)	320 Units	1,700 lb	190 Units	350 Units
Total Units to be purchased…(E)=(C)-(D)	7,000 Units (7,320 Units – 320 Units)	52,180 lb (53,880 lb -1,700 lb)	4,700 Units (4,890 Units -190 Units)	7,520 Units (7,870 Units - 350 Units)
Unit Price….(F)	$16 per Unit	$8 per lb	$120 per Unit	$12 per Unit
Total Direct Materials to be purchased…(G)=(E)*(F)	$1,12,000 (7,000 Units*$16 per Unit)	$4,17,440 (52,180 lb*$8 per lb)	$5,64,000 (4,700 Units*$120 per Unit)	$90,240 (7,520 Units*$12 per Unit)	$11,83,680 ($1,12,000 + $4,17,440+ $5,64,000+ $90,240)

Ans 4)

Direct Labor Cost Budget of Gourmet Grill Company for the month ending, March 31

	Stamping Department	Forming Department	Assembly Department	Total
Hours required for Production :
Backyard Chef	540 Hours (1,080 Units of Backyard chef*0.50 Hours per Unit)	648 Hours (1,080 Units of Backyard chef*0.60 Hours per Unit)	1,080 Hours (1,080 Units of Backyard chef*1 Hours per Unit)
Master Chef	378 Hours (630 Units of Master chef*0.60 Hours per Unit)	504 Hours (630 Units of Master chef*0.80 hours per Unit)	945 Hours (630 Units of Master chef*1.50 hours per Unit)
Total Labor Hours…(A)	918 Hours (540 Hours + 378 Hours)	1,152 Hours (648 Hours + 504 Hours)	2,025 Hours (1,080 Hours + 945 Hours)
Hourly Rate…(B)	$18 per Hour	$16 per Hour	$15 per Hour
Total Direct Labor Cost…(C)=(A)*(B)	$16,524 (918 Hours*$18 per Hour)	$18,432 (1,152 Hours*$16 per Hour)	$30,375 (2,025 Hours*$15 per Hour)	$65,331 ($16,524 + $18,432 + $30,375)