Question

bolk , The Business Decision Case The sales department of Donovan Manufacturing, Inc. has completed the following sales forecast for the months of January through March 20X 1 for its only two products: 50,000 units of J to be sold at $90 each and 30,000 units of K to be sold at $70 each. The desired unit inventories at March 31, 20X1, are 10% of the next quarter's unit sales forecast, which are 60,000 units of J and 30,000 units of K. The January 1, 20X1, unit inventories were 5,000 units of J and 2,000 units of K. Each unit of J requires 3 pounds of material A and 2 pounds of material B for its manufacture: K requires 2 pounds of A and 4 pounds of B. The purchase cost of A is $9 per pound and the purchase cost of B is $5 per pound. Materials A and B on hand at January 1, 20X1, were 19,000 pounds of A and 7,000 pounds of B. Desired inventories at March 31, 20x1, are 14,000 pounds of A and 8,000 pounds of B. Each unit of J requires 0.5 hours of direct labor in the factory, each unit of K requires 1.0 hour of direct labor. The average hourly rate for direct labor is $12 per hour. Estimated manufacturing overhead cost is $6 per direct labor hour plus $90,000 per month. Selling and administrative expenses are estimated to be 10% of sales revenue plus $180,000 per month. Cash sales for the first quarter are estimated to be $300,000 per month. It is forecast that 30% of the credit sales for the quarter ended March 31, 20X1, will occur in January, 30% in February, and 40% in March. Of credit sales (December through March), 40% will be collected as cash in the month of sale and 55% will be collected in the following month. The remainder will be uncollectible. Cash collected in January 20X1 from December 20X0 sales will be $1,050,000. The January 1, 20X1, cash balance was $70,000. The minimum acceptable cash balance at the end of each month is $60,000. Short-term borrowings (6-month term) are made in multiples of $10,000. Interest is charged at the rate of 1% per month on short-term borrowings. The first interest payment is made the month following the borrowing. Cash disbursements (excluding interest on short-term borrowings) are estimated as follows: January February March hp

please please show the work so i can understand this thank you so much for your help

Answer 1

Since, there are multiple parts (in the form of multiple budgets) to the question, I have prepared the first four budgets.

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Part 1)

The sales budget is given as follows:

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Show support for any calculated answers here Donovan Manufacturing, Inc. Sales Budget For the Quarter Ended March 31, 20X1 Forecast Unit Sales Planned Unit Sales Volume 50,000 90 30,000 70 Product Price Budgeted Total Sales 4,500,000 2,100,000 $6,600,000 K Total Sales Revenue Sales Revenue (Product 3) = 50,000*90 = 4,500,000 Sales Revenue (Product K) = 30,000*70 = 2,100,000 Total Sales Revenue = 4,500,000 + 2,100,000 = 6,600,000

Part 2)

The production budget is prepared as below:

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Donovan Manufacturing, Inc. Production Budget For the Quarter Ended March 31, 20X1 Show support for any calculated answers here Units of Finished Product J K 50,000 30,000 6,000 3,000 56,000 33,000 5,000 2,000 51,000 31,000 Forecast Unit Sales Desired Ending for Each Product Quantities to be Available Less: Beginning Inventories Total Production to be Scheduled 60,000*10% (Product J) and 30,000*10% (Product K)

Part 3)

The direct material budget is provided as below

Show support for any calculated answers here Material B Donovan Manufacturing, Inc. Direct Material Budget For the Quarter Ended March 31, 20X1 Material A Direct Material Required: Products: 153,000 Product K: 62,000 Desired Ending Materials Inventories 14,000 Total Pounds of Material to be Available 229,000 Less: Beginning Materials Inventories 19,000 Total Pounds of Material to be purchased 210,000 Unit Purchase Price Total Material Purchases $1,890,000 51,000*3 (Material A for Product J) and 51,000*2 (Material B for Products) 31,000*2 (Material A for Product K) and 31,000*4 (Material B for Product K) 102,000 124,000 8,000 234,000 7,000 227,000 5 $1,135,000 9 210,000*9 (Material A) and 227,000*5 (Material B)

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Part 4)

The direct labor budget is prepared as follows:

Donovan Manufacturing, Inc. Direct Labor Budget For the Quarter Ended March 31, 20X1 Show support for any calculated answers here Direct Labor Hours Required for Production: Product: Product K: Total Direct Labor Hours Hourly Rate of Direct Labor Total Direct Labor Cost 51,000*.5 (Total Direct Labor Hours for Products) 31,000*1 (Total Direct Labor Hours for Product K) 25,500 31,000 56,500 12 $678,000 56,500*12 (Direct Labor Cost)