Preparing Operating BudgetsFlying High Company manufactures kites that sell for $15.00 eac...

Preparing Operating Budgets

Flying High Company manufactures kites that sell for $15.00 each. Each kite requires 2 yards of lightweight canvas, which costs $0.50 per yard. Each kite takes approximately 45 minutes to build, and the labor rate averages $8.00 per hour.

Flying High has the following inventory policies:

Ending finished goods inventory should be 30 percent of next month’s sales. Ending raw materials inventory should be 20 percent of next month’s production.

Expected kite sales for the upcoming months are:

Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $9,000 ($750 per month) for an expected production of 9,000 units for the year. Selling and administrative expenses are estimated at $820 per month plus $0.75 per unit sold.

Required:

Prepare the following for Flying High for the second quarter (April, May, and June). Include each month as well as the quarter 2 total in each budget.

1.Sales budget.

2. Production budget.

3. Raw materials purchases budget.

4. Direct labor budget.

5. Manufacturing overhead budget.

6. Budgeted cost of goods sold.

7. Selling and administrative expenses budget.