Production Budgets Problem -
The Hale Company finished their sales projections for the coming year. The company produces one product. Part of next year's sales projections are as follows:
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July
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August
|
September
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October
|
November
|
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Projected Sales in units
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100,000
|
125,000
|
156,000
|
165,000
|
185,000
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The budget committee has also compiled the following information on inventories:
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Raw materials
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Work-in-Process
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Finished Goods
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Ending Balance, June
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22,000 lbs
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None
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13,000 units
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Desired ending levels (monthly)
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5% of next month's production needs
|
None
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12% of next month's sales
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Engineering has developed the following standards upon which the production budgets will be developed:
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Item
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Standard
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Materials usage
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5 lbs per unit
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Material price per pound
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$1.50 per pound
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Labor usage
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0.4 hours per unit
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Labor rate
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$30 per hour
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Machine hours
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3 machine hours per unit
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The Hale Company uses a modified allocation method for allocating overhead costs. The rates that will be used in the coming year are as follows:
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Overhead item
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Allocation rate
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Utilities
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$0.50 per machine hour
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Inspection
|
$10 per unit produced
|
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Factory supplies
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$2 per unit produced
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|
Depreciation
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$35,000 per month
|
|
Supervision
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$12,000 per month
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Required: Prepare the following production budgets for July, August, and September for the Hale Company:
1. Production budget
2. Materials purchase budget
3. Direct labor budget
4. Overhead budget
For the quarter (quarter totals only), prepare the:
5. Cost of goods manufactured budget