Para Corp is preparing its Master Budget for 20XX. To complete this problem you need to prepare a selection of Paras individual budgets. Specifically, the Production Budget, the Direct Materials Budget and Schedule of Cash Payments, the Direct Labor Budget and the Ending Finished Goods Budget.

REQUIRED

1. PREPARE A PRODUCTION BUDGET (2 POINTS)

Prepare the Production Budget for the first three months of Paras fiscal year (January, February, and March), along with the totals for the quarter using the format shown in the text book.

Relevant Information for preparing the Production Budget includes:

• Sales projections for the 3 months:
  • January 75,000 units
  • February - 100,000 units
  • March 90,000 units
  • April 13,580 units
• Finished goods inventory on January 1, 20XX = 7,500 units
• Desired ending inventory for each month = 25% of the next months budgeted unit sales.

2. PREPARE A DIRECT MATERIALS BUDGET (3 POINTS)

(TO INSURE CONSISTENCY IN GRADING USE THE REQUIRED PRODUCTION GIVEN HERE, NOT THE AMOUNTS YOU COMPUTED FOR QUESTION 1.)

Prepare the Direct Materials Budget for the first three months of Paras fiscal year (January, February, and March), along with the totals for the quarter, using the format shown in the text book. Relevant Information for preparing the Direct Materials Budget includes:

Required Production for the 3 months:

• January 95,000 units
• February - 120,000 units
• March 110,000 units
• April 13,580 units

Number of gallons needed per unit = 3

Raw materials inventory on January 1, 20XX = 30,000 gallons

Desired ending inventory for each month = 10% of the next months budgeted production

Raw materials cost per gallon = $2.00

3. PREPARE A SCHEDULE OF CASH PAYMENTS FOR RAW MATERIALS (3 POINTS)

(TO INSURE CONSISTENCY IN GRADING USE THE COST OF GALLON PURCHASED GIVEN HERE, NOT THE AMOUNTS YOU COMPUTED IN PART 2.)

Prepare the Schedule of Cash Payments for the first three months of Paras fiscal year (January, February, and March), along with the totals for the quarter, using the format shown in the textbook. Relevant information for the Schedule of Cash Payments includes:

• January cost of gallons purchased - $350,000

• February cost of gallons purchased - $400,000 units
• March cost of gallons purchased $450,000
• Para pays for 40% of its purchases in the month of purchase, 50% in the month after purchase and 10% in the second month after purchase.
• Beginning Accounts Payable = $40,000

4. PREPARE A DIRECT LABOR BUDGET (2 POINTS)

Prepare the Direct Labor Budget for the first three months of Paras fiscal year (January, February, and March), along with the totals for the quarter, using the format shown in the text book. Relevant information for the Direct Labor Budget includes:

• Use the required production amounts given for the Direct Materials Budget in Question #2.
• Each unit requires .5 hours of direct labor at a rate of $20 per hour.

5. PREPARE AN ENDING FINISHED GOODS BUDGET (2 POINTS)

Prepare the Ending Finished Goods Budget using the format shown in the text book. Be sure to compute an amount for ending finished goods inventory.

• Use the per unit amounts and costs given for Question 2 (Direct Materials Budget) and Question 4 (Direct Labor Budget)
• Assume Manufacturing Overhead is based on direct labor hours at a cost of $10 per hour.
• Assume ending finished goods inventory = 50,000 units.