Gerrad Manufacturing has projected sales of its product for the next six months as follows:

January 600 units

February 1400 units

March 2,000 units

April 1800 units

May 800 units

June 600 units

The finished product requires 3 pounds of raw material and 10 hours of direct labor.

Gerrad tries to maintain a Finished Goods ending inventory equal to the next two months of sales and a Raw Material ending inventory equal to one-half of the current months production needs. Januarys beginning inventories are expected to conform to company policy.

a. Prepare a production budget for February, March, and April. Note: Use a negative sign in your schedule to indicate that an amount is subtracted. February March April

Sales:

EI :

Total units needed :

BI :

Units produced :

b. Prepare a forecast of the units and cost of raw material that will be required for February, March, and April. The expected cost per pound of raw material is expected to be $2 in February, $2.30 in March, and $2.40 in April.

February March. April

Required raw material units:

Cost of raw material purchases:

c. Prepare a direct labor budget (assuming a $12 per hour rate) for February, March, and April.

February March April

Units produced:

DLHs per unit:

Total hours:

Cost per DLH:

Cost of DL: