Question

Problem 2. Preparing Master budgets UBS Company, a manufacturing business that sells baskets, wants a master budget prepared for the first three months of this year (January, February and March). The managers of the different departments have provided the following information: The Sales Manager has projected the following sales: - January 6,000 units - February 5,000 units - March 6,000 units - Projected selling price is $40.00/unit Your Production Manager gave the following information: - Ending Inventory is to be 20% of next month's production need rounded to the nearest 10. - April's Projected Sales 5.500 units, May 11250 units - December 20X5 Ending Inventory was 1.000 units. The Manufacturing Manager has estimated the following: - Each unit will require 4 grams of material - Material in Ending Inventory is 20% of next month's needs - December's Ending Material Inventory was 4,800 g - Project cost of material: $2.50/gram The Personnel Manager has estimated that Direct Labor will be projected at: - 0.75 hours of Direct Labor per unit - Direct Labor Cost: $8.50/hour The Facilities Manager has estimated that the Manufacturing Overhead will be projected at: - Variable Overhead Rate to be $8 per Direct Labor hours - Fixed Overhead Rate to be $3,000 per month The Accounting Department Manager has provided the following information: • Selling and Administrative Expenses are projected to be a monthly cost of: - Salaries S6,000 - Rent $1,500 - Advertising S1,100 Telephone $300 Other $500 For the operating budget, you are expected to prepare the following: • Sales Budget • Production Budget • Direct Materials Budget • Direct Labor Budget • Manufacturing Overhead Budget Selling & Administrative Expenses Budget

Answer 1

	SALES BUDGET
			January	February	March
	A	Sales in Units	6,000	5,000	6,000
	B	Sales Price Per Unit	$40.00	$40.00	$40.00
	C=A*B	Sales Revenue	$240,000	$200,000	$240,000
		PRODUCTION BUDGET
			January	February	March	April	May
	A	Sales in Units	6,000	5,000	6,000	5,500	11,250
	B	End of Month inventory	1,000	1,200	1,100	2,250
	C	Beginning of Month Inventory	1,000	1,000	1,200	1,100
	D=A+B-C	Budgeted Production in units	6,000	5,200	5,900	6,650
		End of Month inventory in January =20%*5000	1,000
		Beginning of month inventory in January	1,000	(Ending Inventory of December)
		DIRECT MATERIALS BUDGET
			January	February	March	April
	A	Budgeted Production in units	6,000	5,200	5,900	6,650
	B=A*4	Raw materials required (grams)	24,000	20,800	23,600	26,600
	C	End of month inventory(grams)	4,160	4,720	5,320
	D	Beginning of months inventory(grams)	4800	4,160	4,720
	E=B+C-D	Budgeted direct material purchase(grams)	23,360	21,360	24,200
	F=E*$2.5	Budgeted direct material purchase(Dollars)	$58,400	$53,400	$60,500
		End of months inventory in January=20%*20800=	4,160
		Beginning of months inventory in January	4800	(Ending Inventory of December)
		DIRECT LABOR BUDGET
			January	February	March
	A	Budgeted Production in units	6,000	5,200	5,900
	B=A*0.75	Direct Labor Hours	4,500	3,900	4,425
	C	Direct Labor Rate per hour	$8.50	$8.50	$8.50
	D=B*C	Budgeted Direct Labor Cost	$38,250	$33,150	$37,613
		MANUFACTURING OVERHEAD BUDGET
			January	February	March
	A	Direct Labor Hours	4,500	3,900	4,425
	B=A*$8	Budgeted Variable Overhead	$36,000	$31,200	$35,400
	C	Budgeted Fixed Overhead	$3,000	$3,000	$3,000
	D=B+C	Budgeted Manufacturing Overhead	$39,000	$34,200	$38,400
							MANUFACTURING OVERHEAD BUDGET January |B=A*$8 Direct Labor Hours Budgeted Variable Overhead Budgeted Fixed Overhead Budgeted Manufacturing Overhead February 4,500 $36,000 $3,000 $39,000 March 3,900 $31,200 $3,000 $34,200 4,425 $35,400 $3,000 $38,400 D=B+C SELLING AND ADMINISTRATION BUDGET January Salaries Rent Advertising Telephone Others F=A+B+C+D+E Budgeted Selling and Administration costs February $6,000 $1,500 $1,100 $300 $500 $9,400 March $6,000 $1,500 $1,100 $300 $500 $9,400 $6,000 $1,500 $1,100 $300 $500 $9,400