Illustrative Problem Selected information concerning sales and production for Ca
ID: 2591166 • 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 $85.00 per unit b. Estimated inventories, July 1, 2010 Material A: 4,000 lbs. Product K: 3,000 units at $17 per unit $51,000 Material B: 3,500 lbs. Product L: 2,700 units at $35 per unit 94,500 45,500 Total There were no work in process inventorics estimated for July 1,2010. c. Desired inventories at July 31,2010 Material A: Material B: 3,000 lbs. 2,500 Ibs. Product K: Product L: Total 2,500 units at $17 per unit 2,000 units at $35 per unit $42,500 70.000 There were no work in process inventories desired for July 31, 2010. Direct materials used in production: d. Product L 3.5 lbs. per unit 1.8 lbs. per unit Product K Material A 0.7 lb. per unit 1.2 lbs. per unit Material B: Unit costs for direct materials: Material A: $4.00 per lb. Material B: $2.00 per lb. e. f. Direct labor requirements: Department 1 0.4 hr. per unit 0.6 hr. per unit Department 2 0.15 hr. per unit 025 hr. per unit Product K Product L Department 1Department 2 $12.00 per hr. g- Direct labor rate $16.00 per hr h. Estimated factory overhead costs for July: Indirect factory wages $200,000 40,000 25,000 Depreciation of plant and equipment Power and light Indirect materials Total Instructions 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 July. 5. Prepare a cost of goods sold budget for July.Explanation / Answer
Requirement 1 Sales budget for July 2010 Cabot Co. Sales Budget For the Month Ending July 31 Unit Sales Unit Selling Total Sales Volume Price Product K 40000 30 1200000 Product L 20000 65 1300000 Total revenue from sales 2500000 2 Production Budget for July Cabot Co. Production Budget For the Month Ending July 31 Product K Product L Expected units to be sold 40000 20000 Desired inventory, July 31 2500 2000 Total units available 42500 22000 Estimated inventory, July 1 3000 2700 Total units to be produced 39500 19300 3 Direct Material Purchase Budget for July Cabot Co. Direct Materials Purchases Budget For the Month Ending July 31 Material A Material B Required units for production: Product K 27650 47400 Product L 67550 34740 Desired units of inventory, July 31 3000 2500 Total units available 98200 84640 Estimated units of inventory, July 1 4000 3500 Total units to be purchased 94200 81140 Unit price 4 2 Total direct materials to be purchased 376800 162280 4 Direct Labor budget for July Cabot Co. Direct Labor Cost Budget For the Month Ending July 31 Department Department 1 2 Hours required for production: Product K 15800 5925 Product L 11580 4825 Total 27380 10750 Hourly rate 12 16 Total direct labor cost 328560 172000 Cabot Co. Cost of goods sold Budget For the Month Ending July 31 Total Amount in $ Direct Material Material A Material B Opening stock 16000 7000 Add : Purchases 376800 162280 Less : closing stock 12000 5000 Direct Material consumed 380800 164280 545080 Direct Labor Dept. 1 Dept. 2 328560 172000 500560 Factory Overhead Indirect factory wages 200000 Depreciation of plant & Equipemnt 40000 Power & Light 25000 Indirect materials 34000 Cost of production 1344640 Add : Beginning Finished goods Inventory Product K Product L 51000 94500 145500 Less : Ending finished goods inventory Product K Product L 42500 70000 112500 Cost of goods sold 1377640 We appreciate the rating of our answers Thank You