Question

Problem 4) Operating budget for a manufacturing company Comfort Furniture Corp. manufacturers and sells two types of tables: Regular and Deluxe. In July 2017, the company’s budget department gathered the following data to prepare 2018 budget. Direct Materials used to produce one table Direct Material Unit Regular Deluxe A pound 4 lbs 5 lbs B pound 2 lbs 3 lbs C each 0 1 unit Projected Sales in 2018: Regular 60,000 tables at $165/table Deluxe 40,000 tables at $250/table Target Finished Goods Inventory: Jan. 1, 2018 Dec. 31, 2018 Regular 20,000 tables 25,000 tables Deluxe 8,000 tables 9,000 tables Target Direct Materials Inventory: Estimated Price Jan. 1 2018 Dec. 31, 2018 Direct Material A $12/lb 32,000 lbs 36,000 lbs Direct Material B $ 5/lb 29,000 lbs 32,000 lbs Direct Material C $ 3/unit 6,000 units 7,000 units Work-in-Process: The company does not expect to have any beginning or ending work-in-process inventory in 2018. Projected direct labor hours and rates for 2018: Regular Deluxe Hours per chair 2 hrs 3 hrs Rates per hour $12/hr $16/hr Manufacturing Overheads are allocated at the rate of $20 per direct labor-hour. Required) Prepare the following budgets: a. Sales (in dollars) a. Sales budget i. Regular: $9,900,000 ii. Deluxe: $10,000,000 iii. Total=$19,900,000 b. Production (in units) a. 100,000 units c. Direct material usage (in units & in dollars) a. d. Direct material purchase (in units & in dollars) e. Direct labor (in dollars) f. Manufacturing overhead (in dollars) g. Compute budgeted Gross Margin.

Answer 1

		Regular	Deluxe
	A	4	5	LBS
	B	2	3	LBS
	C	0	1	Unit
a	Sales Budget
		Regular	Deluxe
	Sales Unit	60,000	40,000
	Sales Price per unit	165	250
	Sales Revenue(Sales unit*unit price)	9,900,000	10,000,000
b	Production Budget	Regular	Deluxe
	Expected units to be sold	60,000	40,000
	Plus desired inventory at end	25000	9000
	Total	85000	49000
	Less:Estimated inventory at beginning	20000	8000
	Total units to be produced	65000	41000
c	Direct Material Usage	A		B		C
	Regular	260000	(65000*4)	130000	(65000*2)	0	(65000*0)
	Deluxe	205000	(41000*5)	123000	(41000*3)	41000	(41000*1)
	Total required	465000		253000		41000
	Unit Price	12		5		3
	Total direct material usage	5,580,000		1,265,000		123,000
d	Direct Material Purchase	A		B		C
	Required units for production	465,000		253,000		41,000
Add:	Desired inventory at end	36,000		32,000		7,000
	Total	501,000		285,000		48,000
Less:	Estimated beginning inventory	32,000		29,000		6,000
	Total units to be purchsed	469,000		256,000		42,000
	Unit Price	12		5		3
	Total direct material purchased	5,628,000		1,280,000		126,000