Question

Production, Direct Labor, Direct Materials, Sales Budgets, Budgeted Contribution Margin

Greiner Company makes and sells high-quality glare filters for microcomputer monitors. John Craven, controller, is responsible for preparing Greiner’s master budget and has assembled the following data for the coming year. The direct labor rate includes wages, all employee-related benefits, and the employer’s share of FICA. Labor saving machinery will be fully operational by March. Also, as of March 1, the company’s union contract calls for an increase in direct labor wages that is included in the direct labor rate. Greiner expects to have 5,900 glare filters in inventory on December 31 of the current year, and has a policy of carrying 35 percent of the following month’s projected sales in inventory. Information on the first four months of the coming year is as follows:

	January	February	March	April
Estimated unit sales	35,600	34,600	39,000	39,800
Sales price per unit	$82	$82	$76	$76
Direct labor hours per unit	2.80	2.80	2.40	2.40
Direct labor hourly rate	$19	$19	$20	$20
Direct materials cost per unit	$10	$10	$10	$10

Required:
Unless otherwise indicated, round all calculated amounts to the nearest dollar or unit.

1. Prepare the following monthly budgets for Greiner Company for the first quarter of the coming year.

a. Production budget in units:

Greiner Company
Production Budget (units)
For the First Quarter of the Coming Year
	January	February	March	Total
Unit sales
Desired ending inventory
Total units required
Less: Beginning inventory
Units produced

b. Direct labor budget in hours: Round your answers to two decimal places, if required.

Greiner Company
Direct Labor Budget (hours)
For the First Quarter of the Coming Year
	January	February	March	Total
Units produced
Direct labor hours per unit
Total labor budget (hours)

c. Direct materials cost budget:

Greiner Company
Direct Materials Cost Budget
For the First Quarter of the Coming Year
	January	February	March	Total
Units produced
Cost per unit	$	$	$	$
Total direct materials	$	$	$	$

d. Sales budget: Round unit selling price amounts to the nearest cent and use the same for subsequent requirements.

Greiner Company
Sales Budget (dollars)
For the First Quarter of the Coming Year
	January	February	March	Total
Unit sales
Unit selling price	$	$	$	$
Total sales revenue	$	$	$	$

2. Calculate the total budgeted contribution margin for Greiner Company by month and in total for the first quarter of the coming year. (CMA adapted)

Greiner Company
Budgeted Contribution Margin
For the First Quarter of the Coming Year
	January	February	March	Total
Sales revenue	$	$	$	$
Direct labor cost
Materials cost
Contribution margin	$	$	$	$

Answer 1

DATA GIVEN                                     

January                               February              March                   April

Estimated unit sales        35,600                   34,600                   39,000                   39,800

Sales price per unit          $82                         $82                         $76                         $76

Direct labor hours            2.80                        2.80                        2.40                        2.40

per unit

Direct labor hourly rate $19                         $19                         $20                         $20

Direct materials cost       $10                         $10                         $10                         $10

per unit                              

1.

a) Production Budget for the coming 1^st Quarter

Unit Sales	January	Feb	March	Total
Unit sales	35,600	34,600	39,000	109200
Desired Ending Inventory	12,110 (34600*35%)	13,650 (39,000*35%)	13,930 (39,800*35%)	39690
Total Unit Required	47,710	48,250	52,930	148890
Less- beginning inventory	(5900)	(12,110)	(13,650)	(31,660)
Unit produced	41,810	36,140	39,280	117230

b) Direct labor budget in hours

	January	Feb	March	Total
Unit produced	41,810	36,140	39,280	117230
Direct Labor hour per unit	2.80	2.80	2.40
Total Labor budget (hours)	117068	101192	94272	312532

c) Direct material cost budget

	January	Feb	March	Total
Unit produced	41,810	36,140	39,280	117230
Cost per unit	$10	$10	$10
Total direct material	$418100	$361400	$392800	$1172300

d) Sales Budget (dollars)

	Jan	Feb	March	Total
Unit sales	35,600	34,600	39,000	109200
Unit Selling price	$82	$82	$76
Total sales revenue	$2919200	$2837200	$2964000	$8720400

2. Budgeted Contribution Margin

	Jan	Feb	March	Total
Sales Revenue	$2919200	$2837200	$2964000	$8720400
Less-Direct Labor Cost	($2224292) (117068*$19)	($1922648) (101192*$19)	($1885440) (94272*$20)	($6032380)
Less- Direct material Cost	($418100)	($361400)	($392800)	($1172300)
Contribution Margin	$276808	$553152	$685760	$1515720