39. Budgeting for Sales, Production, Direct Materials, Direct Labor, and Manufacturing Overhead. Sports Bars, Inc., produces energy bars and sells them by the case (1 unit - 1 case). Information to be used for the operating budget this coming year follows Average sales price for each case is estimated to be $25. Unit sales for this coming year, ending December 31, are expected to be as follows First quarter 80,0oo Second quarter 84,000 Third quarter 88,000 Fourth quarter 97,000 Finished goods inventory is maintained at a level equal to 15 percent of the next quarter's sales. Finished goods inventory at the end of the fourth quarter budget period is estimated to be 13,00o units Each unit of product requires 5 pounds of direct materials, at a cost of $3 per pound. Management prefers to maintain ending raw materials inventory equal to 10 percent of next quarter's materials needed in production. Raw materials inventory at the end of the fourth quarter budget period is estimated to be 43,000 pounds. Each unit of product requires o.10 direct labor hours at a cost of $14 per hour Variable manufacturing overhead costs are . Indirect materials Indirect labor Other $0.20 per unit $o.15 per unit $o.10 per unit Fixed manufacturing overhead costs per quarter are Salaries $80,000 Other $70,000 Depreciation $55,625 Required: a. Prepare a sales budget using the format shown in Figure 9.3 b. Prepare a production budget using the format shown in Figure 9.4 c. Prepare a direct materials purchases budget using the format shown in Figure 9.5 d. Prepare a direct labor budget using the format shown in Figure 9.6 e. Prepare a manufacturing overhead budget using the format shown in Figure 9.7. Round to the nearest dollar f. As the production manager, what concerns, if any, do you have about production requirements for each of the four quarters? PROBLEMS (continued) 39. Budgeting for Sales, Production, Direct Materials, Direct Labor, and Manufacturing Overhead a. Sales budget Sports Bars, Inc. Sales Budget Year Ending December 31 uarter Year Projected sales in units Sales price per unit Sales revenue b. Production budget Sports Bars, Inc. Production Budget Year Ending December 31 uarter Sales in units (from sales budget) Add desired ending finished goods inventory Total finished goods inventory needed Deduct beginning finished goods inventory Units to be produced 13,000 350,000 PROBLEMS (continued) 39. Budgeting for Sales, Production, Direct Materials, Direct Labor, and Manufacturing Overhead (continued) c. Direct materials purchases budget Sports Bars, Inc. Direct Materials Purchases Budget Year Ending December 31 Quarter Year Units to be produced (from production budget) Materials required per unit (pounds) Materials needed in production Add desired ending inventory Materials needed in inventory Deduct beginning inventory Direct materials to be purchased (pounds) Cost of materials per pound Cost of materials to be purchased Direct materials cost per unit 1,417,575 S15 ROBLEMS (continued) 39. Budgeting for Sales, Production, Direct Materials, Direct Labor, and Manufacturing Overhead (continued) d. Direct labor budget Sports Bars, Inc. Direct Labor Budget Year Ending December 31 Quarter 2 Year Units to be produced (from production budget) Direct labor hours per unit Total direct labor hours needed in production Labor rate per hour Total direct labor cost Direct labor cost per unit PROBLEMS (continued) 39. Budgeting for Sales, Production, Direct Materials, Direct Labor, and Manufacturing Overhead (continued) e. Manufacturing overhead budget Sports Bars, Inc. Manufacturing Overhead Budget Year Ending December 31 uarter Year Units to be produced (from production budget) Variable overhead costs: Indirect materials( Indirect labor ( Other per unit) Per unit) per unit) Total variable overhead costs Fixed overhead costs: Salaries Other Depreciation Total fixed overhead costs Total ovcrhcad costs $248,578 Deduct depreciation Cash payments for overhead Manufacturing overhead per unit $2.80 PROBLEMS (continued) 39 Budgeting for Sales, Production, Direct Materials, Direct Labor, and Manufacturing Overhead (continued) f. The production budget shows the following trend in production from one quarter to the next: First Quarter Second Quarter Third Quarter Fourth uarter
