Question

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			$		$		$	$

Check My Work

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	$        700.00	$     217,000
	Vermont		240	$        750.00	$     180,000
	New Hampshire		360	$        750.00	$     270,000
	Total		910		$     667,000
	Master Chef:
	Maine		150	$     1,200.00	$     180,000
	Vermont		110	$     1,300.00	$     143,000
	New Hampshire		180	$     1,400.00	$     252,000
	Total		440		$     575,000
	Total revenue from sales				$      1,242,000
	Gourmet Grill Company
	Production Budget
	For the Month Ending July 31
		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
	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	Stainless Steel	Burner Sub-	Shelves	Total
		(units)	(lbs.)	assemblies	(units)
				(units)
	Required units for production:
	Backyard Chef [920 units* unit req. p.u. of product]	2760	22080	1840	3680	30360
	Master Chef [430 units* unit req. p.u. of product]	2580	18060	1720	2150	24510
	Desired inventory, July 31	340	1800	155	315	2610
	Total	5680	41940	3715	6145	57480
	Less: Estimated inventory, July 1	290	1500	170	340	84600
	Total units to be purchased	5390	40440	3545	5805	144690
	Unit price	$             15	$               6	$             110	$              10
	Total direct materials to be purchased	$       80,850	$      242,640	$        389,950	$        58,050	$     771,490
	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 [920 units* hrs req. p.u. of product]		460	552	920	1932
	Master Chef [430 units* hrs req. p.u. of product]		258	344	645	1247
	Total		718	896	1565	3179
	Hourly rate		$         17.00	$            15.00	$          14.00
	Total direct labor cost		$   12,206.00	$     13,440.00	$    21,910.00	$47,556.00