Question:
The budget director of Kingdom Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for May 2008 is summarized as follows:
a. Estimated sales of King and Prince chairs for May by sales territory:
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Northern Domestic:
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King
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5,800 units at $650 per unit
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Prince
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6,700 units at $420 per unit
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Southern Domestic:
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King
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3,500 units at $590 per unit
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Prince
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3,800 units at $480 per unit
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International:
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King
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1,200 units at $700 per unit
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Prince
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1,000 units at $530 per unit
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b. Estimated inventories at May 1:
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Direct materials:
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Finished products:
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Fabric
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5,000 sq. yds.
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King
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. . . 920 units
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Wood
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6,500 lineal ft.
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Prince
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. . . 260 units
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Filler
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3,000 cu. ft.
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Springs
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7,250 units
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c. Desired inventories at May 31:
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Direct materials:
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Finished products:
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Fabric
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4,400 sq. yds.
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King
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. . . 800 units
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Wood
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5,800 lineal ft.
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Prince
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. . . 400 units
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Filler
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3,100 cu. ft.
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Springs
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7,500 units
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d. Direct materials used in production:
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In manufacture of King:
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Fabric
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4.6 sq. yds. per unit of product
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Wood
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35 lineal ft. per unit of product
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Filler
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3.8 cu. ft. per unit of product
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Springs
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14 units per unit of product
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In manufacture of Prince:
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Fabric
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3 sq. yds. per unit of product
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Wood
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25 lineal ft. per unit of product
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Filler
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3.2 cu. ft. per unit of product
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Springs
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10 units per unit of product
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e. Anticipated purchase price for direct materials:
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Fabric
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$8.00 per square yard
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Filler
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$3.50 per cubic foot
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Wood
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7.00 per lineal foot
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Springs
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4.50 per unit
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f. Direct labor requirements:
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King:
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Framing Department
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2.5 hours at $12 per hour
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Cutting Department
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1.5 hours at $9 per hour
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Upholstery Department
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2.0 hours at $15 per hour
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Prince:
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Framing Department
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1.8 hours at $12 per hour
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Cutting Department
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0.5 hour at $9 per hour
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Upholstery Department
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2.3 hours at $15 per hour
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Instructions
1. Prepare a sales budget for May.
2. Prepare a production budget for May.
3. Prepare a direct materials purchases budget for May.
4. Prepare a direct labor cost budget for May.