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	8,500 units at $800 per unit
	Kate	6,000 units at $650 per unit
Western Domestic:
	William	6,000 units at $700 per unit
	Kate	6,000 units at $550 per unit
International:
	William	3,000 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			$

Feedback

For each product and each area, multiply the unit sales volume by the unit selling price.

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
Plus desired inventory, March 31
Total
Less estimated inventory, March 1
Total units to be produced

Feedback

Expected units to be sold plus desired ending inventory minus estimated beginning inventory equals units 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
Plus desired inventory, March 31
Total
Less estimated inventory, March 1
Total units to be purchased
Unit price	$	$	$	$
Total direct materials to be purchased	$	$	$	$	$

Feedback

For each material and for both products, the production quantity plus the desired ending inventory minus the estimated beginning inventory equals the quantity of direct materials to be purchased. Multiply the quantity by the price per unit.

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.

Royal British Furniture Company Sales Budget For The Month Ending March 31
Product and area	Unit sale volume	Unit selling price	Total sales
William:
Eastern domestic	8,500	$800	$6,800,000
Western domestic	6,000	700	4,200,000
International	3,000	600	1,800,000
Total	17,500		12,800,000
Kate:
Eastern domestic	6,000	$650	$3,900,000
Western domestic	6,000	550	3,300,000
International	1,000	350	350,000
Total	13,000		$7,550,000

2.

Royal British Furniture Company Production Budget For The Month Ending March 31
	William Units	Kate Units
Expected units to be sold	17,500	13,000
Plus: Desired inventory, March 31	2,000	900
Total	19,500	13,900
Less: Estimated inventory, March 1	1,500	300
Total units to be produced	18,000	13,600

3.

Royal British Furniture Company Direct Material 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	72,000 (18,000*4)	288,000 (18,000*16)	68,400 (18,000*3.8)	252,000 (18,000*14)
Kate	34,000 (13,600*2.5)	163,200 (13,600*12)	27,200 (13,600*3.2)	136,000 (13,600*10)
Plus: Desired inventory, March 31	9,000	20,000	5,000	7,500
Total	115,000	471,200	100,600	395,500
Less: Estimated inventory, March 1	5,500	13,700	3,800	3,500
Total units to be purchased	109,500	457,500	96,800	392,000
Unit price	$9	$5	$1.5	$2
Total direct material to be purchased	$985,500	$2,287,500	$145,200	$784,000	$4,202,200

4.

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	45,000 (18,000*2.5)	18,000 (18,000*1)	54,000 (18,000*3)
Kate	20,400 (13,600*1.5)	6,800 (13,600*0.5)	27,200 (13,600*2)
Total	65,400	24,800	81,200
Hourly rate	$15	$12	$16
Total direct labor cost	$981,000	$297,600	$1,299,200	$2,577,800