Question

Problems 38. Budgeting for Sales, Production, Direct Materials, Direct Labor, and Manufacturing Overhead: Ethical issues. Sanders Swimwear, Inc., produces swimsuits. The following information is to be used for the operating budget this coming year. • Average sales price for each swimsuit is estimated to be $50. Unit sales for this coming year ending December 31 are expected to be as follows: First quarter 3.000 Second quarter 5.000 Third quarter 20.000 Fourth quarter 6,000 . Finished goods inventory is maintained at a level equal to 10 percent of the next quarter's sales. Finished goods inventory at the end of the fourth quarter budget period is estimated to be 400 units. • Each unit of product requires 3 yards of direct materials, at a cost of $4 per yard. Management prefers to maintain ending raw materials inventory equal to 20 percent of next quarter's materials needed in production, Raw materials inventory at the end of the fourth quarter budget period is estimated to be 9.500 yards. • Each unit of product requires 0.5 direct labor hours at a cost of $12 per hour. • Variable manufacturing overhead costs are Indirect materials 50 60 per unit Indirect labor $3.50 per un Other 52 80 per und Fixed manufacturing overhead costs per quarter are Sales $30,000 Other $ 5.000 Depreciation $9.330 Required 1. Prepare a sales budget using the format shown in Figure 9.3 Sales Budget for Jerry's Ice Cream". 2. Prepare a production budget using the format shown in Figure 9.4 Production Budget for Jerry's Ice Cream". 3. Prepare a direct materials purchases budget using the format shown in Figure 9.5 Direct Materials Purchases Budget for Jerry's Ice Cream: 4. Prepare a direct labor budget using the format shown in Figure 9.6 "Direct Labor Budget for Jerry's Ice Cream", 5. Prepare a manufacturing overhead budget using the format shown in Figure 9.7 'Manufacturing Overhead Budget for Jerry's Ice Cream

Answer 1

Answer:

1. Sales Budget Particulars Budgeted Sales (A) (Given) Sales Price Per Unit (B) (Given) Total Gross Sales (C)=(A) * (B) Sales Budget for Sanders Swimwear Inc. For the Year ending December 31, First Quarter Second Quarter Third Quarter Fourth Quarter 3,000 5,000 20,000 6,000 $ 50 $ 50 $ 50 $ 50 $ 150,000 $ 250,000 $ 1,000,000 $ 1,400,000 2. Production Budget Production budget for Sanders Swimwear Inc. For the Year ending December 31, Particulars First Quarter Second Quarter Expected Sales (Units) 3,000 5,000 Add: Desired Ending Finished Goods Unit* 500 2,000 Total Required Units 3,500 7,000 Less: Beginning finished goods Units 300 500 Required Production Units 3,200 6,500 Third Quarter Fourth Quarter 20,000 6,000 600 400 20,600 6,400 2,000 600 18,600 5,800 *Desired Ending Finished Goods Unit = 10% of next quarter sales

3. Direct Material Purchase Budget Direct Material Purchase Budget for Sanders Swimwear Inc. For the Year ending December 31, Particulars First Quarter Second Quarter Third Quarter Fourth Quarter Units to be produced (X) 3,200 6,500 18,600 5,800 Direct material required per units(Yards) (Y) Total material needed for production(Yards) (x) * (Y) 9,600 19,500 55,800 17,400 Add: Desired ending inventory of Material(Yards)** 3,900 11,160 3,480 9,500 Total Material Required(Yards) 13,500 30,660 59,280 26,900 Less: beginning inventory of Material(Yards) 1,920 3,900 11,160 3,480 Material to be purchased (Yards) 11,580 26,760 48,120 23,420 Cost per yard $ 4.00 $ 4.00 $ 4.00 $ 4.00 Costs of Metal to be purchased $ 46,320 S 107,040 $ 192,480 $ 93,680 **Desired ending inventory of material = 20% of next quarter material needed in production.

4. Direct Labor Budget Direct Labor Budget for Sanders Swimwear Inc. For the Year ending December 31, Particulars First Quarter Second Quarter Third Quarter Units to be produced(From Production Budget) (P) 3,200 6,500 Fourth Quarter 5,800 18,600 Time per Unit Production(In Hour) (Q) Total Labor Hours (P) *(Q) Hourly rate Total Labor Cost 0.50 1,600 12.00 $ 19,200 $ 0.50 3,250 12.00 $ 39,000 $ 0.50 9,300 12.00 $ 111,600 $ 0.50 2,900 12.00 34,800 $ $

5. Manufacturing Overhead Budget Manufacturing overhead budget for Sanders Swimwear Inc. For the Year ending December 31, Particulars First Quarter Second Quarter Third Quarter Units to be produced(From Production Budget) 3,200 6,500 18,600 Fourth Quarter 5,800 Variable Cost: Indirect Material ($0.60 per unit) Indirect Labor ($3.50 per unit) Other ($2.80 per unit) Total Variable Cost (P) $ $ $ $ 1,920$ 11,200 $ 8,960 $ 22,080 $ 3,900 $ 22,750 $ 18,200 $ 44,850 $ 11,160 $ 65,100 $ 52,080 $ 128,340 $ 3,480 20,300 16,240 40,020 Fixed Cost: Salaries Other Depreciation Total Fixed Costs (Q) $ $ $ $ 30,000 $ 5,000 $ 9,330 $ 44,330 $ 30,000 $ 5,000 $ 9,330 $ 44,330$ 30,000 $ 5,000 $ 9,330 S 44,330 $ 30,000 5,000 9,330 44,330 Total Manufactuing Overheads (P)+(Q) $ 66,410 $ 89,180$ 172,670 $ 84,350