Question

Learning Objective 3 $22-3 Preparing an operating budget-sales budget Brown Company manufactures luggage sets. Brown sells its luggage sets to depart- ment stores. Brown expects to sell 1,700 luggage sets for $180 each in January and 2,050 luggage sets for $180 each in February. All sales are cash only. Prepare the sales budget for January and February S22-4 Preparing an operating budget-production budget Bailey Company expects to sell 1,500 units of finished product in January and 1,750 units in February. The company has 180 units on hand on January 1 and desires to have an ending inventory equal to 80% of the next month's sales. March sales are expected to be 1,820 units. Prepare Bailey's production budget for January and February Learning Objective 3 Learning Objective 3 S22-5 Preparing an operating budget-direct materials budget Bell expects to produce 1,800 units in January and 2,155 units in February. The com- pany budgets 3 pounds per unit of direct materials at a cost of $10 per pound. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is 4,950 pounds. Bell desires the ending balance in Raw Materials Inventory to be 20% of the next month's direct materials needed for production. Desired ending balance for February is 4,860 pounds. Prepare Bell's direct materials budget for January and February S22-6 Preparing an operating budget-direct labor budget Baker Company expects to produce 2,050 units in January and 1,994 units in February Baker budgets five direct labor hours per unit. Direct labor costs average $9 per hour. Prepare Baker's direct labor budget for January and February Learning Objective 3

Answer 1

SS22-3) Sales Budget Units Sold Selling Price Total Sales January February 1700 2050 $ 180 $ 180 $ 306,000 $ 369,000 Total Sales = No. of Units Sold * Selling Price per unit SS22-4) Production Budget 1500 Sales (Units) Add: Ending Inventory (Units) January February 1750 1400 1456 2900 3206 180 1400 27201 1806 Less : Beginning Inventory (Units) Production (Units) Ending Inventory for January = Ending Inventory for February = February sales * 80% = March sales * 80% = 1750*80% = 1400 units 1820*80% = 1456 units

SS22-5) Direct Materials Budget January February 18002155 Production Units No. of Pounds of Direct material required per unit Total Direct material required Add: Ending Direct materials 5400 1293 6693 4950 Less : Beginning Direct materials Direct material purchases( pounds ) Direct material cost per pound Total Direct material Cost 1743 6465 4860 11325 1293 10032 $ 10 $ 100,320 $ $ 10 17,430 Ending Direct materials for January = February production needs * 20%= 6465*20%=1293

SS22-6) Direct Labour Budget Production Units Labour hours required per unit Total labour hours required Direct labour cost per hour Total Labour Cost January February 2050 1994 5 10250 9970 9 $ 9 $ 92,250 $ 89,730 $