1. Sales Budget:

Upton Inc. sells air bags for use in original equipment automobile manufacturing. Upton expects the following items to be sold in the first three months of the coming year:

January	100,000 units
February	95,000 units
March	110,000 units

The average price for an air bag is $500.

Required: Prepare a sales budget for the first three months of the coming year, showing units and sales revenue by month and in total for the quarter.

	January	February	March	1st Quarter Total
Units
Price
Sales

2. Production Budget:

Upton Inc. makes air bags for use in original equipment automobile manufacturing. In the first four months of the coming year, Upton expects the following unit sales:

January	100,000 units
February	95,000 units
March	110,000 units
April	112,000 units

Uptons policy is to have 25% of next months sales in ending inventory. On January 1st, it is expected that there will be 15,000 air bags on hand.

Required: Prepare a production budget for the first quarter of the year. Show the number of air bags that should be produced each month, as well as for the quarter in total.

	January	February	March	1st Quarter Total
Sales
Desired EI
Total needs
Less: BI
Units to be produced

3. Direct Materials Purchases Budget:

Upton Inc. makes air bags for use in original equipment automobile manufacturing. Planned production in units for the first three months of the coming year is:

January	108,750 units
February	98,750 units
March	110,500 units

Each air bag requires 5 ounces of special plastic. Company policy requires that ending inventories of raw materials for each month be 10% of the next months production needs. That policy was met for the ending inventory of December in the prior year. The cost of one ounce of special plastic is $50. (Note: Round all unit amounts to the nearest unit. Round all dollar amounts to the nearest dollar).

Required:

1.	Calculate the ending inventory of plastic in ounces for December of the prior year, and for January and February. What is the beginning inventory of plastic for January?
2.	Prepare a direct materials purchases budget for the months of January and February.

(1)

Ending inventory for December	= 0.10 x ounces of plastic per unit x units for January production = units
Ending inventory for January	= 0.10 x ounces of plastic per unit x units for February production = units
Ending inventory for February	= 0.10 x ounces of plastic per unit x units for March production = units
Beginning inventory for January	= Same as ending inventory for December of units

(2) Direct materials purchases budgetplastic in ounces:

	January	February
Production in units
ounces per unit
Ounces for production
Desired ending inventory
Needed
Less: Beginning inventory
Purchases
Price per ounce
Dollar purchases

4. Direct Labor Budget:

Upton Inc. makes air bags for use in original equipment automobile manufacturing. Planned production in units for the first three months of the coming year is:

January	108,750 units
February	98,750 units
March	110,500 units

Each air bar requires 0.1 direct labor hours of assembly. The average wage is $25 per hour.

Required: Prepare a direct labor budget for the months of January, February, and March, as well as the total for the first quarter.

Direct Labor Budget:

	January	February	March	Total
Units to be produced
DLH per unit
Total DLHs
Wage rate
Direct labor cost

5. Overhead Budget:

Upton Inc. makes air bags for use in original equipment automobile manufacturing. Budgeted direct labor hours for the first three months of the coming year are:

January	10,874 DLHs
February	9,875 DLHs
March	11,050 DLHs

The variable overhead rate is $3.00 per direct labor hour. Fixed overhead is budgeted at $5,000 per month.

Required: Prepare an overhead budget for the months of January, February, and March, as well as the total for the first quarter.

Overhead:

	January	February	March	Total
Total DLHs
Variable OH rate
Total variable OH
Add: Fixed OH
Total OH