New Production Equipment Purchase

The budget director of the Freeman Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month.

Selected information concerning sales and production data for February 20X9 is presented below.

1. Estimated Sales of King and Queens Chairs for February by Sales Territory

Midwest Region

King680 units at $820 per unitQueens850 units at $540 per unit

Southern Region

King390 units at $820 per unitQueens480 units at 4540 per unit

International Region

King420 units at $870 per unitQueens330 units at $600 per unit

1. Estimated Inventories at February 1, 20X9

Direct Materials

Fabric470 square yardsWood620 linear ftFiller300 cubic ftSprings710 units

Finished Products

King105 unitsQueens35 units

1. Desired Inventories at February 28, 20X9

Direct Materials

Fabric430 square yardsWood680 linear ftFiller350 cubic ftSprings660 units

Finished Products

King95 unitsQueens40 units

1. Direct Materials Used in Production

In Manufacture of King

Fabric6.5 square yards per unit of productWood42 linear ft per unit of productFiller4.6 cubic ft per unit of productSprings18 units per unit of product

In Manufacture of Queens

Fabric4.5 square yards per unit of productWood30 linear ft per unit of productFiller3.8 cubic ft per unit of productSprings14 units per unit of product

1. Anticipated Purchase Price for Direct Materials for Both Products

Fabric$16.00 per square yearWood$9.50 per linear ftFiller$4.50 per cubicSprings

1. Direct Labor Requirements

King

Framing Department1.2 hours at $16 per hourCutting Department0.5 hours at $19 per hourUpholstery Department0.8 hours at $20 per hour

Queens

Framing Department1.0 hours at $16 per hourCutting Department0.4 hours at $19 per hourUpholstery Department0.6 hours at $20 per hour

1. sales budget for February 20X9.
2. production budget for February 20X9.
3. direct materials purchases budget for February 20X9.
4. direct labor budget for February 20X9.
5. The production supervisor wants to purchase new production equipment for April 20X9. The goal is to replace the labor-intensive production system. Please memo to the executive team explaining why new production equipment could affect the production and purchases budgets.