Question

7. 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 July is summarized as follows:

   a. Estimated sales for July by sales territory:

   Maine:
   Backyard Chef	310 units at $700 per unit
   Master Chef	150 units at $1,200 per unit
   Vermont:
   Backyard Chef	240 units at $750 per unit
   Master Chef	110 units at $1,300 per unit
   New Hampshire:
   Backyard Chef	360 units at $750 per unit
   Master Chef	180 units at $1,400 per unit

   b. Estimated inventories at July 1:

   Direct materials:
   Grates	290 units
   Stainless steel	1,500 lbs.
   Burner subassemblies	170 units
   Shelves	340 units
   Finished products:
   Backyard Chef	30 units
   Master Chef	32 units

   c. Desired inventories at July 31:

   Direct materials:
   Grates	340 units
   Stainless steel	1,800 lbs.
   Burner subassemblies	155 units
   Shelves	315 units
   Finished products:
   Backyard Chef	40 units
   Master Chef	22 units

   d. Direct materials used in production:

   In manufacture of Backyard Chef:
   Grates	3 units per unit of product
   Stainless steel	24 lbs. 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 lbs. 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	$15 per unit
   Stainless steel	$6 per lb.
   Burner subassemblies	$110 per unit
   Shelves	$10 per unit

   f. Direct labor requirements:

   Backyard Chef:
   Stamping Department	0.50 hr. at $17 per hr.
   Forming Department	0.60 hr. at $15 per hr.
   Assembly Department	1.00 hr. at $14 per hr.
   Master Chef:
   Stamping Department	0.60 hr. at $17 per hr.
   Forming Department	0.80 hr. at $15 per hr.
   Assembly Department	1.50 hrs. at $14 per hr.

   Required:

   1. Prepare a sales budget for July.

   Gourmet Grill Company Sales Budget For the Month Ending July 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 July. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

   Gourmet Grill Company Production Budget For the Month Ending July 31
   	Units
   	Backyard Chef	Master Chef

   3. Prepare a direct materials purchases budget for July. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

   Gourmet Grill Company Direct Materials Purchases Budget For the Month Ending July 31
   	Grates (units)	Stainless Steel (lbs.)	Burner Sub- assemblies (units)	Shelves (units)	Total
   Required units for production:
   Backyard Chef
   Master Chef
   Desired inventory, July 31
   Total
   Estimated inventory, July 1
   Total units to be purchased
   Unit price	$	$	$	$
   Total direct materials to be purchased	$	$	$	$	$

   4. Prepare a direct labor cost budget for July.

   Gourmet Grill Company Direct Labor Cost Budget For the Month Ending July 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

1. Prepare a sales budget for July.
Gourmet Grill Company
Sales Budget
For the Month Ending July 31,
Product and Area		Unit Sales	Unit Selling	Total Sales
		Volume	Price
Backyard Chef:
	Maine	310	$               700	$      217,000
	Vermont	240	$               750	$      180,000
	New Hampshire	360	$               750	$      270,000
	Total	910		$      667,000
Master Chef:
	Maine	150	$           1,200	$      180,000
	Vermont	110	$           1,300	$      143,000
	New Hampshire	180	$           1,400	$      252,000
	Total	440		$      575,000
Total revenue from sales				$   1,242,000

2. Prepare a production budget for July.
Gourmet Grill Company
Production Budget
For the Month Ending July 31,
	Units
	Backyard Chef	Master Chef
Expected units to be sold	910	440
Plus desired inventory, July 31,	40	22
Total	950	462
Less estimated inventory, July 1,	30	32
Total units to be produced	920	430

3. Prepare a direct materials purchases budget for July.
Gourmet Grill Company
Direct Materials Purchases Budget
For the Month Ending July 31,
	Grates	Stainless Steel	Burner Sub-	Shelves	Total
	(units)	(lbs.)	assemblies	(units)
			(units)
Required units for production:
Backyard Chef	2760	22080	1840	3680
Master Chef	2580	18060	1720	2150
Plus desired inventory, July 31	340	1800	155	315
Total	5680	41940	3715	6145
Less estimated inventory, July 1	290	1500	170	340
Total units to be purchased	5390	40440	3545	5805
Unit price	$                                  15	$             6	$               110	$                 10
Total direct materials to be purchased	$                          80,850	$242,640	$       389,950	$         58,050	$      771,490

4. Prepare a direct labor cost budget for July.
Gourmet Grill Company
Direct Labor Cost Budget
For the Month Ending July 31,
			Stamping		Forming Department		Assembly Department	Total
			Department
Hours required for production:
	Backyard Chef		460		552		920
	Master Chef		258		344		645
	Total		718		896		1565
Hourly rate			$                 17		$                15		$                14
Total direct labor cost			$         12,206		$        13,440		$        21,910	$