Question

Budget Preparation Collins Company is preparing its master budget for April. 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 10,000 and 12,000 units, respectively, and the unit selling price is $46? $4 b. If the beginning finished goods inventory is an estimated 3,000 units and the desired ending inventory is 2,000 units, how many units should be produced? c. What dollar amount of material should be purchased at $4 per pound if each unit of product requires 3 pounds and beginning and ending materials inventories should be 4,000 and 5,000 pounds, respectively? d. How much direct labor cost should be incurred if each unit produced requires 1.5 hours at an hourly rate of $20? 2$ e. How much manufacturing overhead should be incurred if fixed manufacturing overhead is $50,000 and variable manufacturing overhead is $3 per direct labor hour?

Answer 1

a) Number of units sold in territory-A Number of units sold in territory-B Total number of units sold Unit selling price Total sales revenue 10,000 12,000 22,000 (10000 + 12000] $46 $1,012,000 [22000 x $46] Number of hours required per unit Direct labor rate per hour Direct labor cost per unit 1.5 $20 $30 (1.5 hours x $20] 21,000 (Ref: Part-(b)] 1.5 31,500 [21000 x 1.5 hours] b) Total number of units sold Add: Desired ending inventory Total units needed Less: Beginning inventory Number of units to be produced $3 Number of units to be produced Number of hours required per unit Total hours required for production Variable Mfg. OH rate per hour Total variable Mfg. OH applied Add: Fixed Mfg. OH applied Total Mfg. overhead cost applied 22,000 (Ref: Part-(a)] 2,000 24,000 -3,000 21,000 $94,500 (31500 hours x $3] $50,000 $144,500 ($94500 + $50000] c) 21,000 (Ref: Part-(b)] Number of units to be produced Pounds required per unit Pounds required for production Add: Desired ending inventory Total pounds of materials needed Less: Beginning inventory Total pounds to be purchased Purchase price per pound Amount of materials to purchase 63,000 [21000 x 3 pounds] 5,000 68,000 -4,000 64,000 $4 $256,000 [64000 x $4]