In: Accounting
Note: I need a step by step answer to the following problem to better understand how this works.
Hot Coffee Manufacturing produces and sells oak tables. The budgeted manufacturing costs per table are as follows:
Direct costs
Oak top 48 square feet at $10 per sq. ft.
Table legs 4 legs at $5 per leg
Direct labor is 3 hours and 24 minutes per table at $15 per hour.
The variable overhead rate is $6 per direct labor hour and the fixed overhead rate is $8 per direct labor hour.
Inventories are expected to be as follows:
Beginning |
Target Ending |
|
Direct Materials |
||
Oak tops |
500 |
550 |
Table legs |
240 |
200 |
Finished Goods |
20 tables |
30 tables |
Budgeted Sales for May, Year 18 are expected to be 2,000 tables. Selling prices are budgeted to be $600 per table.
For May Year 18, prepare a
Sales Budget.
Production Budget in units
Direct materials budget in units and in dollars
Manufacturing Labor Budget
Overhead Budget
Refer to A above, the company expects to have beginning cash of $150,000 on May 1, Year 18. In addition to the above expenditures, the company is expected to have the following expenses the income statement:
Selling Expenses 24,000
Administrative Expenses 16,000
Depreciation 20,000
Prepare a cash budget for May Year 18
Solution:
Part 1 – Sales Budget
Sales Budget for May |
|
Budgeted Sales Units (tables) |
2000 |
Selling Price per table |
$600 |
Budgeted Sales Revenue (1200*600) |
$1,200,000 |
Part 2 – Production Budget in Units
Production Budget |
|
Expected Sales Units |
2,000 |
Plus: Desired Ending Inventory |
30 |
Total Units needed |
2030 |
Less: Expected Beginning Inventory |
20 |
Production Requirements |
2010 |
Part 3 – Direct materials budget in unit and in dollars
Oak Tops |
Table Legs |
Total |
|
Production requirements (number of tables) |
2010 |
2010 |
|
Raw material required per table |
48 feet |
4 legs |
|
Raw material required for production |
96480 |
8040 |
|
Plus: Desired Ending Inventory |
550 |
200 |
|
Total raw materials need |
97030 |
8240 |
|
Less: Beginning Inventory |
500 |
240 |
|
Raw material to be purchased |
96530 |
8000 |
|
Cost per unit |
$10.00 |
$5.00 |
|
Cost of purchases |
$965,300 |
$40,000 |
$1,005,300 |
Part 4 – Manufacturing Labor Budget
Direct labor Cost budget |
|
Units to be produced (from part 2) |
2010 |
Required Direct Labor time per unit (3 hours and 24 minutes per table) |
3.40 |
Total required direct labor time |
6834 |
Direct labor rate per hour |
$15 |
Total Direct labor cost |
$102,510 |
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Pls ask separate question for remaining parts.