Instructions The project involves creating a sequence of budgets based on particular sales, production, and cost data. You will be asked to create a Sales Budget, Production Budget, and Budgets for Direct Materials, Direct Labor and Manufacturing Overhead as part of this project. The budgets need to be created in the correct sequence as one leads to the next. The over-arching goal of this exercise is to see the value of the budgeting process. Using the assumptions presented, prepare the following schedules (showing quarterly and annual amounts where applicable): a. Sales Budget b. Production Budget Direct Materials Purchases Budget d. Direct Labor Budget Manufacturing Overhead Budget e. Sales Revenue The Eastern Technology Company manufactures Weather Radios for sale to retailers such as Wal-Mart, Target, etc. The 2016 quarterly unit sales estimates and projected sales prices per unit areas follows: Quarter 1 Quarter 4 Sales units Price per unit 9,200 $90 Quarter 2 9,300 $90 Quarter 3 9,500 $90 9,400 $90 Also, note that that projected sales (and projected production) for Quarter 1 of 2017 is 10,000 units Product Cost Assumptions The company's product requires two raw materials, resistors and switches. Cost parameters are as follows: Number of Components/Unit Switches @ $4/switch Resistors @ $8/switch 3 2 Number of minutes required to complete finished unit Direct labor minutes per unit 30 Machine minutes per unit 12 Hour rates used Direct labor rate= $10/hour Manufacturing overhead rates (i.e., the PDOHRs to use to apply overhead) Labor-related= $25/hour Machine-related= $40/hour Eastern applies manufacturing overhead using two cost drivers: direct-labor hours and machine hours. Ending Inventories The desired ending inventories for each of the two direct materials is 10% of the next quarter's respective amount of direct materials needed for production. The desired finished goods ending inventory is 5% of the next quarter's budgeted sales units. Beginning inventory for direct materials and finished goods are assumed to be zero as of 1/1/2016. a) Sales Budget Q1 Q2 Q3 Q4 # of Units Price per Unit Total Sales $ $ $ $ $ b) Production Budget Sales units Desired Ending FG Beg FG Units to produce c) Direct Materials Budget - Switches Production units DM per unit Total DM required Desired Ending DM Beg DM Units to purchase Cost per DM unit DM Purchases Direct Materials Budget - Resistors Production units DM per unit Total DM required Desired Ending DM Beg DM Units to purchase Cost per DM unit DM Purchases $ $ $ $ $ $ Total DM Purchases Cost DM Cost per unit produced $ $ $ $ $ $ $ $ d) Direct Labor Budget Production units DL Hours per unit DL Hours required DL Rate per Hour Total DL Cost DL Cost per unit produced $ $ $ $ $ $ $ $ $ $ $ $ $ $ e) Manufacturing Overhead Budget Labor-related rate per hour DL hours required Labor-related OH cost Machine-related rate per hour Machine hours required Machine-related OH cost $ $ $ $ $ $ $ $ Total OH costs OH Cost per unit produced Total Product Cost per Unit Cost of Goods Sold $ $ $ $ $ $ $ $
