Question

Prepare a sales, production, direct materials, direct labor, overhead, and selling & administrative expense budget by quarter for the year 2020 for the Budgets R Us Co. using the following assumptions:

1. Sales quantity by quarter: 10,000, 11,000, 12,000, 13,000, 14,000, 15,000.
2. Selling price per unit = $20.
3. Ending FG inventory = 10%.
4. RM pounds per unit = 4.
5. Ending RM inventory = 20%.
6. RM price per pound = $2
7. Direct labor hours per unit = 2
8. Direct labor hourly rate = $20.
9. Variable overhead costs per direct labor hour: Indirect labor = $1.60, Indirect material = $.40, Maintenance = $.70, Repairs = $.30.
10. Fixed overhead costs per quarter: Depreciation = $20,000, Supervisor’s salary = $10,000, Rent = $5,000.
11. Variable selling & administrative costs: Sales commission = 5% of sales dollars, Packaging & shipping = $2 per unit sold.
12. Fixed selling & administrative costs per quarter: Sales salaries = $30,000, Insurance = $5,000, Advertising = $15,000.

Answer 1

sales

	2020	2021
	Q1	Q2	Q3	Q4	Q1	Q2
SALES	10,000	11,000	12,000	13,000	14,000	15,000
sales price per unit	$20	$20	$20	$20	$20	$20
Total Budgeted sales	$200,000	$220,000	$240,000	$260,000	$280,000	$300,000

production

	2020	2021
	Q1	Q2	Q3	Q4	Q1	Q2
sales	10,000	11,000	12,000	13,000	14,000	15,000
Add: desired ending inventory	1,100[11,000*10%]	1,200[12,000*10%]	1,300[13,000*10%]	1,400[14,000*10%]	1,500[15,000*10%]
Less: Beginning ending inventory	1,000[10,000*10%]	1,100	1,200	1,300	1,400
Production Budget	10,100[10,000+1,100-1,000]	11,100[11,000+1,200-1,100]	12,100[12,000+1,300-1,200]	13,100[13,000+1,400-1,300]	14,100 [14,000+1,500-1,400]

direct labor

	2020	2021
	Q1	Q2	Q3	Q4	Q1	Q2
Production	10,100[10,000+1,100-1,000]	11,100[11,000+1,200-1,100]	12,100[12,000+1,300-1,200]	13,100[13,000+1,400-1,300]	14,100 [14,000+1,500-1,400]
Labor hour per unit	2	2	2	2	2
Total labor hours	20,200	22,200	24,200	26,200	28,200
rate per labor hour	$20	$20	$20	$20	$20
Budgeted labor rate	$404,000[$20*20,200]	$444,000 [$20*22200]	$484,000 [$20*24,200]	$524,000	$564,000

4.overhead budget

	2020	2021
	Q1	Q2	Q3	Q4	Q1	Q2
Variable Overhead
indirect labor, Indirect Material,Maintenance and repairs	$60,600[($1.60+$0.40+$0.70+$0.30)*20,200]	$66,600[($1.60+$0.40+$0.70+$0.30)*22,200]	$72,600($1.60+$0.40+$0.70+$0.30)*24,200]	$78,600[($1.60+$0.40+$0.70+$0.30)*26,200]	$84,600[($1.60+$0.40+$0.70+$0.30)*28,200]
Fixed Overhead
depreciation , supervisor salary,Rent	$35,000 [$20,000+$10,000+$5,000]	$35,000	$35,000	$35,000	$35,000
Total Budgeted Overhead	$95,600[$60,600+35,000]	$101,600[$66,600+35,000]	$107,600[$72,600+35,000]	$113,600[$78,600+35,000]	$119,600[$84,600+35,000]

5.selling and administrative budget

	2020	2021
	Q1	Q2	Q3	Q4	Q1
Variable:
sales commission	$10,000[$200,000*5%]	$11,000[$220,000*5%]	$12,000[$240,000*5%]	$13,000[$260,000*5%]	$14,000[$280,000*5%]
Packing & Shipping	$22,000[$2*11,000]	$24,000[$2*12,000]	$26,000[$2*13,000]	$28,000[$2*14,000]	$30,000[$2*15,000]
Fixed:
sales salaries,Insurance , advertising	$50,000[$30,000+5,000+15,000]	$50,000	$50,000	$50,000	$50,000
Total budgeted sellign and administrative cost	$82,000 [10,000+22,000+50,000]	$85,000[$11,000+24,000+50,000]	$88,000[$12,000+26,000+50,000]	$91,000[$13,000+28,000+50,000]

Fixed costs will remain constant

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