Question

Collins Inc. has gathered the following budgeting information for next year and has asked you to prepar their master budget. Sales for the final quarter of the prior year total 1,400 units. Expected sales (in units) for the current year are: 1,260 (Quarter 1), 840 (Quarter 2), 1,120 (Quarter 3), and 1120 (Quarter 4). Sales for the first quarter of the following year total 1,680 units. The selling price is $470 per unit in the first three quarters of the year, and $490 per unit in the final quarter a. b. Company policy calls for a given quarter's ending finished goods inventory to equal 50% of the next quarter's expected unit sales. The finished goods inventory at the end of the prior year is 630 units, which complies with the policy. The product's manufacturing cost is $175 per unit including per unit costs of $96 for materials (8 lbs. at $12 per lb.), $60 for direct labor (3 hours $20 direct labor rate per hour), $15 for variable overhead, and $4 for fixed overhead. Annual fixed overhead consists, incurred evenly throughout the year, consist of depreciation on production equipment, $7.300; factory utilities, $9,100, and other factory overhead of $1,800. Company policy also calls for a given quarter's ending raw materials inventory to equal 50% of next quarter's expected materials needed for production. The prior year-end inventory is 4,200 lbs of materials, which complies with the policy. The company expects to have 6,720 lbs. of materials in inventory at year-end. The company has no work in process inventory at the end of any quarter Sales representatives' commissions are 12% of sales and are paid in the quarter of the sales. The ales manager's quarterly salary will be $48,000 in the first three quarters of the year, and d. $51,000 in the final quarter. Quarterly general and administrative expenses include $20,000 administrative salaries, rent expense of $12,000 per quarter, insurance expense of $10,000 per quarter, straight line depreciation of $10,000 per quarter, and 1% monthly interest on the $350,000 long-term note payable (12% annually)

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Answer 1

Collins Inc Direct Materials Purchase Budget For the year ended December 31, 2018 Particulars Budgeted Units to be Produced Pounds per unit Materals needed for production Add: Budgeted ending Raw Materials (50% of next month requirement) (7,840*50/100); (8,960*50/100); (11,200 units *50/100) Total Raw materials required in pounds Less: Budgeted opening Raw Materials (ending inventory of previous month's raw materials Raw Materials to be Purchased in pounds (a) Cost per pound (b) Total cost of direct materials purchases (a*b) uarter 1 Quarter 2 Quarter 3 Quarter 4 Year 1,050 980 1,120 1.400 4,550 8,400 7,8408,96011.20036,400 3,920 6.720 20,720 12,32012,320 14,56017,920 57,120 4,480 5.600 3,920 5.60018.200 8,1208,40010,08012,32038,920 S12 $97.440 S100,800S120,960 S147.840 S467,040 4.200 4,480 S12 S12 S12 S12

Working Notes - Production Budget: Particulars Budgeted Sales Units Add: Budgeted Ending inventory is 50% of next month's sales (50% on 840): (50% on 1,120): (50% on 1,120): (50% on 1,680) Total Units required Less: Budgeted Opening Inventory in units (Ending inventory of previous month) Budgeted Units to be Produced Quarter 1 Quarter 2 Quarter 3 Quarter 4 [Year 1,260 8401,1201,1204,340 420 1,680 560 8402.380 6.720 560 1,400 1,680 1.960 630 1,050 420 980 560 1,120 5602,170 4,550 1,400