Question

Budget Preparation Reeves Company is preparing its master budget for July. Use the given estimates 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 A and B estimate sales of 8,000 and 20,000 units, respectively, and the unit selling price is $55? $ 0 b. If the beginning finished goods inventory is an estimated 2,500 units and the desired ending inventory is 1,000 units, how many units should be produced? c. What dollar amount of material should be purchased at $3 per pound if each unit of product requires 2 pounds and beginning and ending materials inventories should be 3,000 and 4,000 pounds, respectively? $ 0 d. How much direct labor cost should be incurred if each unit produced requires 1.5 hours at an hourly rate of $16? $ 0 e. How much manufacturing overhead should be incurred if fixed manufacturing overhead is $60,000 and variable manufacturing overhead is $2 per direct labor hour? $ 0

Answer 1

a)
Sales Revenue (8,000 units + 20,000 units = 28,000 units * $55 per unit)	$1,540,000
b)
Estimated sales in units	28,000
Add: Desired ending invetory in units	1,000
Less: Beginning inventory in units	2,500
Units required to produce	26,500
c)
Pounds of raw materials required to produce (26,500 units * 2 pounds)	53,000
Add: Ending inventory of raw materials in pounds	4,000
Less: Beginning inventory of raw materials in pounds	3,000
Pounds of raw materials required to purchase (a)	54,000
Cost per pound of raw materials (b)	$3
Cost of raw materials purchased (a*b)	$162,000
d)
Units required to produce (a)	26,500
Direct labor hour required per unit (b)	1.5
Total direct labor hours required (c = a*b)	39,750
Cost per direct labor hour (d)	$16
Cost of direct labor (c*d)	$636,000
e)
Fixed manufacturing overheads	$60,000
Add: Variable manufacturing overhead (39,750 hours * $2 per hour)	$79,500
Total manufacturing overheads	$139,500