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 19,000 units, respectively, and the unit selling price is $51?

$_______

b. If the beginning finished goods inventory is an estimated 2,000 units and the desired ending inventory is 3,000 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 5,000 and 4,000 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?

$________

e. How much manufacturing overhead should be incurred if fixed manufacturing overhead is $58,000 and variable manufacturing overhead is $2.50 per direct labor hour?

$________

Answer 1

Ans. 1	SALES   BUDGET
	Particulars	A	B	Total
	Budgeted unit sales	10000	19000	29000
	(*) Selling price per unit	$51	$51	$51
	Total sales	$510,000	$969,000	$1,479,000
Ans. 2	PRODUCTION BUDGET
	Particulars	April
	Expected units to be sold (total)	29000
	Add: Desired ending inventory units	3000
	Total required units	32000
	Less: Beginning inventory units	-2000
	Units to be produced	30000
Ans. 3	Direct Materials Budget
	Particulars	April
	Budgeted production (units)	30000
	(X) Materials requirement per unit	3
	Materials needed for production	90000
	Add: Budgeted ending inventory	4000
	Total materials requirements	94000
	Less: Budgeted beginning inventory	-5000
	Materials to be purchased	89000
	(X) Direct materials per unit	$4.00
	Total budgeted direct materials	$356,000
Ans. 4	Direct Labor Budget
	Particulars	April
	Budgeted production (units)	30000
	(X) Direct labor hours per unit	1.50
	Total labor hours needed	45000
	(X) Wages rate per hour	$20
	Budget direct labor cost	$900,000
	*Total labor hours needed = units to be produced * direct labor hours
	*Budgeted direct labor cost = Total labor hours needed * Wages rate per hour
Ans. 5	Manufacturing Overhead Budget
	Particulars	April
	Total labor hours needed	45000
	(X) Variable overhead rate	$2.50
	Budgeted variable overhead   (a)	$112,500
	Budgeted fixed overhead   (b)	$58,000
	Budgeted total overhead (a+b)	$170,500