Question

Budget Preparation Westport Company is preparing its master budget for May. Use the estimates

provided to determine the amounts necessary for each of the following requirements. (Estimates may

be related to more than one requirement.)

a. What should total sales revenue be if territories E and W estimate sales of 50,000 and 100,000

units, respectively, and the unit selling price is $27?

b. If the beginning finished goods inventory is an estimated 7,000 units and the desired ending in-

ventory is 6,000 units, how many units should be produced?

c. What dollar amount of material should be purchased at $2 per pound if each unit of product re-

quires 2.5 pounds and beginning and ending materials inventories should be 13,500 and 12,000

pounds, respectively?

d. How much direct labor cost should be incurred if each unit produced requires 0.5 hours at an

hourly rate of $11?

e. How much manufacturing overhead should be incurred if fixed manufacturing overhead is

$45,000 and variable manufacturing overhead is $1.30 per direct labor hour?

Answer 1

a)				E	W	total
	Expected sale units			50,000	100,000	150,000
	unit selling price			2	2	2
	Total sales revenue			100000	200000	300000
	total sales revenue = $300,000
b)	Estimated sale units				150,000
	Add Ending inventory				6,000
	total needs				156,000
	less beginning inventory				-7,000
	production required				149,000
	units to be produced		149000 units
c)	production required				149000
	pounds per unit required				2.5
	total pounds required				372500
	Add:closing inventory				12,000
	total needs				384500
	less :Beginning inventory				-13,500
	materials required				371000
	cost per pound				2
	total cost of materials				742000
	cost of materials		$742,000
d)	production required				149,000
	hours required per unit				0.5
	Total hours required				74500
	Rate per hour				11
	total direct labor cost				819500
	total direct labor cost			819,500
e)	total hours required				74,500
	cost per direct labor				1.3
	total variable manufacturing overhead				96850
	Add:Fixed manufacturing overhead				45,000
	total manufacturing overhead				141850
	total manufacturing overhead			141,850