Question

HP Pay • homework: 1. Shirt Company manufactures and sells Hawaiian shirts. The marketing department expects to sell each shirt for $45 and estimates the following unit sales: June July August September October Sales (units) 850 800 750 650 400 The production department likes to keep 30% of next month's sales in its finished goods inventory. At the end of May, it had 255 shirts in stock. Each shirt requires 1.8 yards of fabric. The fabric costs $5.20 per yard. Shirt Co. likes to keep 40% of next month's production needs in inventory. At the end of May it had 601.2 yards of fabric. Each shirt takes 15 minutes to sew and employees are paid $10 per hour. A B. Prepare a sales budget for the months June through October Prepare a production budget for the months June through August. Prepare a direct materials budget for the months June through August. Prepare a direct labor budget for the months June through August.

Answer 1

Required Budgets are as prepared below:

1. Sales Budget
Shirt Company
Sales Budget
July to October
	Month
Particulars	June	July	August	September	October
Sale Units (a)	850	800	750	650	400
*Price per unit (b)	$45.00	$45.00	$45.00	$45.00	$45.00
Total Sales	$38,250	$36,000	$33,750	$29,250	$18,000
2. Production Budget
Shirt Company
Production Budget
June, July and August
	Month
Particulars	June	July	August	Total	September
Next month budgeted sales (units)	800	750	650	2,200	400
Ratio of inventory to future sales	30%	30%	30%	30%	30%
Ending inventory required	240	225	195	195	120
Sales for current month	850	800	750	2,400	650
Required units of available production	1,090	1,025	945	2,595	770
Beginning inventory units	255	240	225	255	195
Units to be produced	835	785	720	2,340	575
3. Raw material Budget
Shirt Company
Raw Material Purchase Budget
June, July and August
	Month
Particulars	June	July	August	Total	September
Planned production units (a)	835	785	720	2,340	575
*Fabrics required per shirt (b)	1.8	1.8	1.8	1.8	1.8
Direct Material Required for production (c )	1,503	1,413	1,296	4,212	1,035
Budgeted ending Direct Material (d)	565	518	414	414
Beginning Direct Material (e )	601	565	518	601
Budgeted direct material purchase f= c+d-e	1,467	1,366	1,192	4,025
Cost per unit (g)	$5.20	$5.20	$5.20	$5.20
BudgetedDM purchases	$7,628	$7,104	$6,196	$20,929
4. Direct labour Budget
Shirt Company
Direct Labour Budget
June, July and August
	Month
Particulars	June	July	August	Total
Planned production units (a)	835	785	720	2,340
*Direct labour required per unit (b)	0.3	0.3	0.3	0.3
Budgeted Direct labour hours	209	196	180	585
Cost per direct labour hour	10	10	10	10
Budgeted Direct labour Cost	$2,088	$1,963	$1,800	$5,850