Question

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Vista Electronics, Inc. manufactures two different types of coils used in electric motors. In the fall of the current year, Erica Becker, the controller, compiled the following data.

• Sales forecast for 20x0 (all units to be shipped in 20x0):

Product	Units			Price
Light coil		58,000		$	280
Heavy coil		38,000			380

• Raw-material prices and inventory levels:

Raw Material	Expected Inventories, January 1, 20x0				Desired Inventories, December 31, 20x0				Anticipated Purchase Price
Sheet metal		36,000	lb.			40,000	lb.		$	15
Copper wire		33,000	lb.			36,000	lb.			8
Platform		5,800	units			6,800	units			4

• Use of raw material:

	Amount Used per Unit
Raw Material	Light Coil				Heavy Coil
Sheet metal		4	lb.			5	lb.
Copper wire		2	lb.			3	lb.
Platform						2	unit

• Direct-labor requirements and rates:

Product	Hours per Unit				Rate per Hour
Light coil		3			$	15
Heavy coil		5				20

• Finished-goods inventories (in units):

Product	Expected January 1, 20x0				Desired December 31, 20x0
Light coil		23,000				28,000
Heavy coil		9,500				10,500

• Production overhead:

Overhead Cost Item	Activity-Based Budget Rate
Purchasing and material handling	$	0.80	per pound of sheet metal and copper wire purchased
Depreciation, utilities, and inspection	$	7.00	per coil produced (either type)
Shipping	$	2.00	per coil shipped (either type)
General production overhead	$	5.00	per direct-labor hour

Required:

1. Prepare the sales budget (in dollars) for 20x0.

2. Prepare the production budget (in units) for 20x0.

3. Prepare the raw material purchases budget (in quantities) for 20x0.

4. epare the raw material purchases budget (in dollars) for 20x0.

Answer 1

1. Statement of sales budget (in dollars) for 20x0:

Particulars	Light Coil	Heavy Coil
a. Sales (units)	58,000	38,000
b. Selling price per unit	$280	$380
c. Total sales (a*b)	$16,240,000	$14,440,000

2. Statement showing the production budget (in units) for 20x0:

Particulars	Light Coil	Heavy Coil
a. Sales (units)	58,000	38,000
b. Desired Ending Finished Goods Inventory	28,000	10,500
c. Expected Beginning Finished Goods Inventory	23,000	9,500
d. Production (Units) (a + b - c)	63,000	39,000

3. Statement showing the raw materials purchases budget (in quantities) for 20x0:

Particulars	Sheet Metal	Copper Wire	Platform
a. Light Coil (63,000 units)	252,000	126,000
	(63,000 * 4lb)	(63,000 * 2lb)
b. Heavy Coil	195,000	117,000	78,000
	(39,000 * 5lb)	(39,000 * 3lb)	(39,000 * 2 units)
c. Budgeted Raw material Usage (a + b)	447,000	243,000	78,000
d. Ending Raw material inventories	40,000	36,000	6,800
e. Total material requirements (c + d)	487,000	279,000	84,800
f. Beginning Raw material inventories	36,000	33,000	5,800
g. Raw material Purchases (Qunatities) (e - f)	451,000	246,000	79,000

3. Statement showing the raw materials purchases budget (in dollars) for 20x0:

Particulars	Sheet Metal	Copper Wire	Platform
a. Raw material Purchases (Qunatities)	451,000	246,000	79,000
b. Purchase Price	$15	$8	$4
c. Raw material purchase cost (a * b)	$6,765,000	$1,968,000	$316,000