Prepare a set of budgets, to include: a sales budget, a production budget, a dir
ID: 2344413 • Letter: P
Question
Prepare a set of budgets, to include: a sales budget, a production budget, a direct materials budget, a direct labor budget and a cash budget for the next month of May.Unit sales 100,000 units
Unit price $15
Beginning inventory in units 8,000
Desired ending inventory in units 12,000
The product requires four pounds of raw material, costing $2.50 per pound.
A desired ending raw materials inventory of 6,000 pounds
Each product requires 1/2 hour of direct labor at a rate of $9 per hour.
Eastvaco experiences the following: expected cash received in current month (May) of $45,000.Eastvaco has some equipment it is no longer using and plans to sell in May for $3,500.During the current month (May) payments for materials is expected to be $10,000, direct labor payroll is expected to be $12,500, and miscellaneous expenditures is expected to total $14,900. Beginning cash balance (May 1st) is $1,230. Expected collections on previous month (April) accounts receivable is $600,000.Expected collections on March sales is $300,000.
Explanation / Answer
SALES BUDGET:
Units
Selling price
Total revenues
Product
100,000
15
1500000
PRODUCTION BUDGET:
Budgeted unit sales
100,000
Add target ending inventory
12,000
Total required units
112,000
Deduct beginning inventory
8,000
Units to be produced
104,000
DIRECT MATERIALS BUDGET:
Usage Budget in Quantity and Dollars:
Physical units budget
Direct materials required
416,000
(104,000*4)
Cost
$1,040,000
(416,000*2.5)
Purchases Budget:
To be used in production
416,000
Add Target ending inventory
6,000
Total requirements
422,000
Deduct beginning inventory
4,000
Purchases to be made
418,000
Cost Budget:
$ 1,045,000
(418,000*2.5)
DIRECT LABOR BUDGET:
Output units produced
Labor hours per unit
total hours
hourly wage
total
416,000
0.5
208000
$9
$1,872,000
CASH BUDGET
Cash balance, beginning
1,230
Add receipts
expected receipts
45,000
sale of equipment
3,500
Total cash available
49,730
Deduct disbursements
Materials
10,000
Labor
12,500
miscellaneous
14,900
total cash disbursements
37,400
cash excess (deficiency)
12,330
SALES BUDGET:
Units
Selling price
Total revenues
Product
100,000
15
1500000
PRODUCTION BUDGET:
Budgeted unit sales
100,000
Add target ending inventory
12,000
Total required units
112,000
Deduct beginning inventory
8,000
Units to be produced
104,000
DIRECT MATERIALS BUDGET:
Usage Budget in Quantity and Dollars:
Physical units budget
Direct materials required
416,000
(104,000*4)
Cost
$1,040,000
(416,000*2.5)
Purchases Budget:
To be used in production
416,000
Add Target ending inventory
6,000
Total requirements
422,000
Deduct beginning inventory
4,000
Purchases to be made
418,000
Cost Budget:
$ 1,045,000
(418,000*2.5)
DIRECT LABOR BUDGET:
Output units produced
Labor hours per unit
total hours
hourly wage
total
416,000
0.5
208000
$9
$1,872,000
CASH BUDGET
Cash balance, beginning
1,230
Add receipts
expected receipts
45,000
sale of equipment
3,500
Total cash available
49,730
Deduct disbursements
Materials
10,000
Labor
12,500
miscellaneous
14,900
total cash disbursements
37,400
cash excess (deficiency)
12,330