Question

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

The budget director of Royal 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 February is summarized as follows:

a. Estimated sales of King and Prince chairs for February by sales territory:

Northern Domestic:
King	610 units at $780 per unit
Prince	750 units at $550 per unit
Southern Domestic:
King	340 units at $780 per unit
Prince	440 units at $550 per unit
International:
King	360 units at $850 per unit
Prince	290 units at $600 per unit

b. Estimated inventories at February 1:

Direct materials:
Fabric	420 sq. yds.
Wood	580 linear ft.
Filler	250 cu. ft.
Springs	660 units
Finished products:
King	90 units
Prince	25 units

c. Desired inventories at February 28:

Direct materials:
Fabric	390 sq. yds.
Wood	650 linear ft.
Filler	300 cu. ft.
Springs	540 units
Finished products:
King	80 units
Prince	35 units

d. Direct materials used in production:

In manufacture of King:
Fabric	6.0 sq. yds. per unit of product
Wood	38 linear ft. per unit of product
Filler	4.2 cu. ft. per unit of product
Springs	16 units per unit of product
In manufacture of Prince:
Fabric	4.0 sq. yds. per unit of product
Wood	26 linear ft. per unit of product
Filler	3.4 cu. ft. per unit of product
Springs	12 units per unit of product

e. Anticipated purchase price for direct materials:

Fabric	$12.00	per sq. yd.
Wood	7.00	per linear ft.
Filler	$3.00	per cu. ft.
Springs	4.50	per unit

f. Direct labor requirements:

King:
Framing Department	1.2 hrs. at $12 per hr.
Cutting Department.	0.5 hr. at $14 per hr.
Upholstery Department	0.8 hr. at $15 per hr.
Prince:
Framing Department	1.0 hr. at $12 per hr.
Cutting Department.	0.4 hr. at $14 per hr.
Upholstery Department	0.6 hr. at $15 per hr.

Required:

1. Prepare a sales budget for February.

Royal Furniture Company Sales Budget For the Month Ending February 28
Product and Area		Unit Sales Volume	Unit Selling Price	Total Sales
King:
	Northern Domestic
	Southern Domestic
	International
	Total
Prince:
	Northern Domestic
	Southern Domestic
	International
	Total
Total revenue from sales

2. Prepare a production budget for February.

Royal Furniture Company Production Budget For the Month Ending February 28
	Units
	King	Prince
Expected units to be sold
Plus desired inventory, February 28
Total units required
Less estimated inventory, February 1
Total units to be produced

3. Prepare a direct materials purchases budget for February.

Royal Furniture Company Direct Materials Purchases Budget For the Month Ending February 28
	Direct Materials
		Fabric (sq. yds.)		Wood (linear ft.)		Filler (cu. ft.)		Springs (units)	Total
Required units for production:
King
Prince
Plus desired inventory, February 28
Total units required
Less estimated inventory, February 1
Total units to be purchased
Unit price
Total direct materials to be purchased

4. Prepare a direct labor cost budget for February.

Royal Furniture Company Direct Labor Cost Budget For the Month Ending February 28
			Framing Department		Cutting Department		Upholstery Department	Total
Hours required for production:
	King
	Prince
	Total hours required
Hourly rate
Total direct labor cost

Answer 1

Ans:1)

Royal Furniture Company Sales Budget For the Month Ending February 28
Product and Area			Unit Sales Volume	Unit Selling Price($)	Total Sales($)
King:
	Northern Domestic		610	780	475,800
	Southern Domestic		340	780	265,200
	International		360	850	306,000
	Total				1,047,000
Prince:
	Northern Domestic		750	550	412,500
	Southern Domestic		440	550	242,000
	International		290	600	174,000
	Total				828,500
Total revenue from sales		$1,875,500

2) Production Budget

Royal Furniture Company Production Budget For the Month Ending February 28
	Units
	King	Prince
Expected units to be sold	1,310	1,480
Plus desired inventory, February 28	80	35
Total units required	1,390	1,515
Less estimated inventory, February 1	-90	-25
Total units to be produced	1300	1490

3) Direct materials purchases budget for February.

Royal Furniture Company Direct Materials Purchases Budget For the Month Ending February 28
	Direct Materials
		Fabric (sq. yds.)		Wood (linear ft.)		Filler (cu. ft.)		Springs (units)	Total
Required units for production:
King	1300*6.0	7,800	1300*38	49,400	1300*4.2	5,460	1300*16	20,800
Prince	1490*4.0	5,920	1490*26	38,480	1490*3.4	5,032	1490*12	17,760
Plus desired inventory, February 28		390		650		300		540
Total units required		14,110		88,530		10792		39,100
Less estimated inventory, February 1		420		580		250		660
Total units to be purchased		13,690		87,950		10,542		38,440
Unit price		$12.00		$7.00		$3.00		$4.50
Total direct materials to be purchased		$164,280		$615,650		$31,626		$172,980	$984,536

4) Direct labor cost budget for February

Royal Furniture Company Direct Labor Cost Budget For the Month Ending February 28
			Framing Department		Cutting Department		Upholstery Department	Total
Hours required for production:
	King	1,300.00*1.20	1,560.00	1,300.00*0.50	650.00	1,300.00*0.80	1,040.00
	Prince	1,480.00*1.00	1,480.00	1,480.00*0.40	592.00	1,480.00*0.60	888.00
	Total hours required		3,040.00		1,242.00		1,928.00
Hourly rate			$12.00		$14.00		$15.00
Total direct labor cost			$36,480		$17,388		$28,920	$82,788