Question

Scholastic Furniture, Inc., manufactures a variety of desks, chairs, tables, and shelf units that are sold to public school systems throughout the Midwest. The controller of the company’s Desk Division is currently preparing a budget for the second quarter of the year. The following sales forecast has been made by the division’s sales manager.

April	10,000	desk-and-chair sets
May	12,000	desk-and-chair sets
June	15,000	desk-and-chair sets

Each desk-and-chair set requires 10 board feet of pine planks and 1.5 hours of direct labor. Each set sells for $50. Pine planks cost $0.50 per board foot, and the division ends each month with enough wood to cover 10 percent of the next month’s production requirements. The division incurs a cost of $20 per hour for direct-labor wages and fringe benefits. The division ends each month with enough finished-goods inventory to cover 20 percent of the next month’s sales.

Required:
Complete the following budget schedules.
1. Sales budget.
2. Production budget (in sets).
3. Raw-material purchases.
4. Direct-labor budget.

• Required 1
• Required 2
• Required 3
• Required 4

Sales budget:

	April May June Sales (in sets) 10,000 Sales price per set $50 Sales revenue $500,000 $0 $0

Production budget (in sets):

	April May June Sales 10,000 Add: Desired ending inventory 2,400 3,000 Total requirements 12,400 0 3,000 Less: Projected beginning inventory 2,000 Planned production 10,400 0 3,000

Raw-material purchases: (Round "Cost per board foot" to 2 decimal places.)

April May June Planned production (sets) 10,400 Raw material required per set (board feet) 10 Raw material required for production (board feet) 104,000 0 0 Add: Desired ending inventory of raw material, in board feet (10% of next month’s requirement) 12,600 16,000 Total requirements 116,600 0 16,000 Less: Projected beginning inventory of raw material, in board feet (10% of current month’s requirement) 10,400 Planned purchases of raw material (board feet) 106,200 0 16,000 Cost per board foot $0.50 Planned purchases of raw material (dollars) $53,100 $0 $0

Direct-labor budget: (Round "Direct labor hours per set" to 1 decimal place.)

	April May June Planned production (sets) 10,400 Direct-labor hours per set 1.5 Direct-labor hours required 15,600 0 0 Cost per hour $20 Planned direct-labor cost $312,000 $0 $0

Answer 1

1.

Sales Budget:
	April	May	June
Sales (in sets)	10,000	12,000	15,000
Sales price per set	$50	$50	$50
Sales revenue (sales * sales price per set)	$500,000	$600,000	$750,000

2.

Production Budget (in sets):
	April	May	June
Sales	10,000	12,000	15,000
Add: Desired ending inventory	2,400 (12,000*20%)	3,000 (15,000*20%)	3,000
Total requirements	12,400	15,000	18,000
Less: Projected beginning inventory	2,000 (10,000*20%)	2,400 (12,000*20%)	3,000 (15,000*20%)
Planned production	10,400	12,600	15,000

3.

Raw-material purchases:
	April	May	June
Planned production (sets)	10,400	12,600	15,000
Raw material required per set (board feet)	10	10	10
Raw material required for production (board feet)	104,000 (10,400*10)	126,000 (12,600*10)	150,000 (15,000*10)
Add: Desired ending inventory of raw material, in board feet (10% of next month’s requirement)	12,600 (126,000*10%)	15,000 (150,000*10%)	16,000
Total requirements	116,600	141,000	166,000
Less: Projected beginning inventory of raw material, in board feet (10% of current month’s requirement)	10,400 (104,000*10%)	12,600 (126,000*10%)	15,000 (150,000*10%)
Planned purchases of raw material (board feet)	106,200	128,400	151,000
Cost per board foot	$0.50	$0.50	$0.50
Planned purchases of raw material (dollars)	$53,100 (106,200*$0.50)	$64,200 (128,400*$0.50)	$75,500 (151,000*$0.50)

4.

Direct-labor Budget:
	April	May	June
Planned production (sets)	10,400	12,600	15,000
Direct-labor hours per set	1.5	1.5	1.5
Direct-labor hours required	15,600 (10,400*1.5)	18,900 (12,600*1.5)	22,500 (15,000*1.5)
Cost per hour	$20	$20	$20
Planned direct-labor cost	$312,000 (15,600*$20)	$378,000 (18,900*$20)	$450,000 (22,500*$20)