Question

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?

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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?

Answer

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?

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d. How much direct labor cost should be incurred if each unit produced requires 1.5 hours at an hourly rate of $16?

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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?

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Answer 1

		Units	Selling Price	Revenue
a)	A	8000	55	4,40,000
	B	20000	55	11,00,000
				15,40,000
b)	Beginning Inventory	2500
	Closing inventory	1000
	Sales (8000+20000)	28000
	Sales	=	(Opening+Production-closing)
	28000	=	2500+Production- 1000
	28000-1500	=	Production
	26,500	=	Production
c)	Beginning material invenory	=	3000
	Closing material invenory	=	4000
	Each unit requirement of material	=	2
	Requirement of 26500 units (26500*2)	=	53000
	Purchase of material	=	53000-3000+4000
			=	54000 units
	rate per pound	=	3
	Cost of purchase of material	1,62,000
d)	Direct labour cost	=	26500*1.5*16
			=	6,36,000
e)	Fixed manufacturing overhead	60000
	variable manufacturing overhead	2*26500*1.5
				79500
	Total			60000+79500
				1,39,500