Mike\'s Bikes makes and sells highquality replacement gears for mountain bikes.

Question

Mike's Bikes makes and sells highquality replacement gears for mountain bikes. Mike Speedway, controller, is responsible for preparing the master budget and has assembled the following data for 2016. The direct labour rate includes wages and all employee-related benefits and the employer's share of Canada Pension Plan (CPP) and Employment Insurance (EI). Labour-saving machinery will be fully operational by February. Also, as of March 1, the company's union contract calls for an increase in direct labour wages that is included in the direct labour rate. Mike's Bikes expects to have 94 gear units in inventory at December 31, 2015, and has a policy of carrying 5% of the following month's projected sales in inventory during the first quarter of the year. 2016 January February March April Estimated unit sales 752 940 1,880 2,256 Sales price per unit $40 $40 $35 $35 Direct labour hours per unit 0.75 0.50 0.50 0.50 Direct labour hourly rate $20 $20 $22 $22 Direct materials cost per unit $4 $4 $4 Direct materials per gear 0.30 kg 0.30 kg 0.30 kg 0.30 kg Your answer is partially correct. Try again. Prepare the following budgets for Mike's Bikes for the first quarter of 2016. Be sure to show supporting calculations: (1) Sales Budget. January February March Total TSales 752 940 1 1880 3572 Tsales price per unity 40 'D | | Sales Revenue 30080 37600 65800 133480

Explanation / Answer

Sales Budget Particulars January February March Total Sales(a) - Given in question               752               940           1,880              3,572 Sales Price Per Unit(b) - Given in question                 40                 40                 35 Sales Revenue(a*b)         30,080         37,600         65,800         133,480 Production Budget Particulars January February March April Sales(a) - Given in question               752               940           1,880              3,572 Add: Ending Inventory(5% of following month sales)                 47                 94               113                 254 Less: Beginning Inventory                 94                 47                 94                 235 Production               705               987           1,899             3,591 Direct Materials Budget Particulars January February March April Production(a) - Taken from above table               705               987           1,899              3,591 Direct Materials (b) - (a)*0.3               212               296               570              1,077 Add: Ending Inventory(ending inv in above table * 0.3%)                 14                 28                 34                   76 Less: Beginning Inventory(Beginning inv in above table * 0.3%)                   5                   2                   5                   12 Purchases               221               322               599             1,142 Direct labour Budget Particulars January February March April Production(a) - Taken from 2nd table               705               987           1,899              3,591 Direct labour hours per unit(b) - Given in question             0.75             0.50             0.50 Direct labour Hours c - a*b               529               494               949              1,972 Direct labour Hourly Rate(d) - Given in question                 20                 20                 22 Direct Labour Cost(e) - c * d         10,575           9,870         20,887           41,332

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