Integrated sales budget, production budget, and purchases budget (LO 3) Strum Enterprises is a boutique guitar manufacturer. The company produces both acoustic and electric guitars for rising and established professional musicians. Claire Strum, the company's sales manager, prepared the following sales forecast for 2015. The forecasted sales prices include a 5 percent increase in the acoustic guitar price and a 10 percent increase in the electric guitar price, to cover anticipated increases in raw materials prices.

Acoustic guitar sales	$1,260	400	500	300	600
Electric guitar sales	$2,530	200	80	100	120

Required

(a)	Prepare Strum's sales budget for 2015.

(b)	On December 31, 2014, Strum had 60 acoustic guitars in stockfewer than the desired inventory level of 80 guitars, based on the following quarter's sales. The company has budgeted for sales of 450 acoustic guitars in the first quarter of 2016. Prepare the 2015 production budget for acoustic guitars.

(c)

Each acoustic guitar requires a maple neck blank, which Strum purchases for $60. On December 31, 2014, Strum had 400 neck blanks in inventory. Spoilage during the production process results in a standard quantity of 1.2 necks per acoustic guitar. Because of recent delivery problems, Strum wants to maintain an ending inventory equal to 50 percent of the following quarter's production needs. Since the supplier has assured Strum that the delivery issues will be resolved by the end of December, Strum wants only 300 neck blanks in inventory on December 31, 2015. Prepare the purchases budget for neck blanks for 2015.

5.32

Integrated production budget, purchases budget, and direct labor budget (LO 3) Sandoval Furniture builds high-end hand-made dining tables. Mackenzie Sandoval, the company's owner, has developed the following sales forecast for 2015.

Forecasted sales (tables)	2,500	2,700	2,900	2,200

Because of the time needed to create each table, Sandoval maintains an ending Finished Goods Inventory of 20 percent of the following quarter's budgeted sales. Sandoval has been following this inventory policy for several years. The company ended 2014 with 500 tables on hand. The standard cost card for a table is as follows:

American cherry wood	25 board feet	$5/board foot	$125
American cherry turning square (legs)	4 squares	$10/square	40
Direct labor	12 DLH	$18/DLH	216
Variable overhead	12 DLH	$60/DLH	720
Fixed overhead	12 DLH	$10/DLH	120
			$1,221

Required

(a)	Prepare Sandoval's production budget for 2015. Assume that the desired ending inventory for 2015 is 600 tables.

(b)

Sandoval maintains inventory of American cherry wood equal to 10 percent of the following quarter's production needs. On December 31, 2014, Sandoval's physical inventory count showed 5,500 board feet of American cherry. Due to an anticipated price increase in 2016, managers want to have 10,000 board feet of American cherry wood in inventory on December 31, 2015. Prepare Sandoval's 2015 direct materials purchases budget for American cherry wood.

(c)	Prepare Sandoval's direct labor budget for 2015.

(d)

Assume that because of the skill level required to make the tables, Sandoval cannot easily hire additional workers to handle peaks in demand. Consequently, the company maintains a steady workforce of 60 employees and guarantees each worker 500 hours per quarter. For any additional time required to complete the scheduled production, these same workers earn 1.5 times their normal hourly rate. Prepare Sandoval's direct labor budget for 2015.