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:

1. 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

Required 1 :
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	350 Units	$ 800	$280,000 {350 units*$800}
Vermont	400 Units	$825	$330,000 {400 units*$825}
New Hampshire	320 Units	$ 850	$272,000 {320 units*$850}
Total	1,070 Units		$ 882,000
Master Chef :
Maine	200 Units	$ 1,400	$280,000 {200 units*$1,400}
Vermont	240 Units	$ 1,500	$360,000 {240 units*$1,500}
New Hampshire	200 Units	$ 1,600	$320,000 {200 units*$1,600}
Total	640 Units		$ 960,000
Total Revenue From sales			$ 1,842,000 {882,000+960,000}

Required 2 :
Gourmet Grill Company
Production Budget
For the Month Ending March 31
	Units
	Backyard Chef	Master Chef
Expected units to be sold	1,070 Units	640 Units
Plus:Desired inventory,March 31	40 Units	26 Units
Total	1,110 Units	666 Units
Less: Estimated Inventory,March 1	(30 Units)	(36 units )
Total units to be produced	1,080 Units	630 Units

Required 3 :
Gourmet Grill Company
Direct Materials Purchase Budget
For the Month Ending March 31
	Grates (Units )	Stainless steel (lb)	Burner Subassemblies(Units)	Shelves (Units)	Total
Required Units for Production :
Backyard Chef	3,240 units {1,080 Units *3 units }	25,920 lbs {1,080 Units *24lb }	2,160 units {1,080 Units *2 Units }	4,320 units {1,080 Units *4 Units }
Master Chef	3,780 units {630 Units *6 Units }	26,460 lbs {630 Units *42 lb }	2,520 units {630 Units *4 Units }	3,150 units {630 Units *5 Units }
Plus:Desired inventory,March 31	300 units	1500 lbs	210 units	400 units
Total	7,320 units	53,880 lbs	4,890 units	7,870 Units
Less: Estimated Inventory,March 1	(320 Units)	(1,700 lbs)	(190 Units)	(350 Units)
Total units to be purchased	7,000 Units	52,180 lbs.	4,700 units	7,520 Units
Unit Price	$ 16 Per Unit	$ 8 Per lb	$ 120 Per Unit	$ 12 Per Unit
Total Direct materials to be Purchased	$112,000 {7,000 Units*$16 }	$417,440 {52,180*$8 }	$564,000 {4,700 Units*$120 }	$90,240 {7,520 Units*$12 }	$1,183,680

Required 4 :
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	540 Hrs. {1,080 Units *0.50 Hr.}	648 Hrs. {1,080 Units *0.60 Hr.}	1,080 Hrs. {1,080 Units *1.00 Hr.}
Master Chef	378 Hrs. {630 Units *0.60 Hr.}	504 Hrs. {630 Units *0.80 Hr.}	945 Hrs. {630 Units *1.50 Hr.}
Total	918 Hrs.	1,152 Hrs.	2,025 Hrs.
Hourly Rate	$ 18 Per Hr.	$ 16 Per Hr.	$ 15 Per Hr.
Total Direct Labor Cost	$16,524   {918 Hrs.*$18 Per Hr.}	$18,432    {1,152 Hrs.*$16 Per Hr.}	$30,375    {2,025 Hrs.*$15 Per Hr.}	$ 65,331