Illustrative Problem Selected information concerning sales and production for Ca
ID: 2565778 • Letter: I
Question
Illustrative Problem Selected information concerning sales and production for Cabot Co.for July 2010 are summarized as follows a. Estimated sales Product K 40,000 units at $30.00 per unit Product L: 20,000 units at $65.00 per unit b. Estimated inventories, July 1,2010 Material A: Material B: 3,500 lbs. Product L 2,700 units at $35 per unit4.502 4,000 lbs. Product K: 3,000 units at$17 per unit 51,000 Total There were no work in process inventories estimated for July 1,2010. Desired inventories at July 31, 2010: e. Material A: 3,000 lbs. Product K: 2,500 units at $17 per unit $ 42,500 70,000 12.509 Material B: 2,500 lbs. Product L: Total 2,000 units at $35 per unit There were no work in process inventories desired for July 31, 201o. d. Direct materials used in production: Product K Product L Material A Material B 0.7 tb. per unit 1.2 lbs. per unit 3.5 lbs. per unit 18 lbs. por unit e. Unit costs for direct materials Material A: $4.00 per lb. Material B $2.00 per lb. f. Direct labor requirements: Department 1 Product K Product L 04 hr. per unit 0.6 hr. por unit 0.15 hr. per unit 0.25 hr. per unit g. Direct labor rate $12.00 per hr $16.00 per hr h. Estimated factory overhead costs for July: Indirect factory wages Depreciation of plant and equipment Power and light Indirect materiats Total $200,000 40,000 25,000 34.000 1. Prepare a sales budget for July 2. Prepare a production budget for July. 3. Prepare a direct materials purchases budget for july 4 Prepare a direct labor cost budget for luly 5. Prepare a cost of goods sold budget for JulyExplanation / Answer
Req 1: Sales Budget Product K Product L Estimated Sales units 40,000 units 20,000 units Selling price per unit $ 30 per unit $ 65 per unit Estimated Sales in $ $1,200,000 $1,300,000 Req 2: Production budget in units Product K Product L Estimated Sales units 40,000 units 20,000 units Add: Desired Closing Inventory on July 31 2,500 units 2,000 units Less: Opening inventory on July 1 3,000 units 2,700 units Budgeted Production units 39,500 units 19,300 units Req 3: Direct material purchase budget Material A Material B Requirement in production of ProductK Material A(39,500 units@0.7 lbs per unit) 27650 Material B(39,500 units@1.2 lbs per unit) 47400 Requirement in Production of Product L Material A(19,300 units@3.5 lbs per unit) 67550 Material B(19,300 units@1.8 lbs per unit) 34740 Total Requirement in lbs 95200 82140 Add: Desired Closing inventory on July 31 in lbs 3,000 2,500 Less: Opening Inventory on July 1 in lbs 4,000 3,500 Budgeted purchase in lbs 94,200 81,140 Purchase price per lbs 4 2 Budgeted purchase in $ $376,800 $162,280 Req 4: Direct labour cost budget: Deptt 1 Deptt 2 Total Labour hours required for production of ProductK Deptt 1(39,500 units@0.4 hr per unit) 15800 Deptt 2(39,500 units@0.15 per unit) 5925 21725 Labour hors required for productionof Product L Deptt1(19,300 unist@0.6 hr per unit) 11580 Deptt 2(19,300 units@0.25 hr per unit) 4825 16405 Total Labur hours required 27380 10750 38130 Labour rate per hour 12 16 Budgeted labour cost $328,560 $172,000 $500,560