Part A

The ABC company manufactures beds that sell for $750. Budgeted sales for May , June and July 2020 are 3000 units , 4200 units and 3500 respectively.

Each bed requires 25 square feet of cedar wood at a cost of $8 per sq foot. The company wants to maintain an inventory of bookcases equal to 15% of the following month sales. Inventory

on May 1 consisted of 100 bookcases

The company wants to maintain an inventory of oak equal to 30% of the next months requirements. Materials inventory on May 1 consisted of 600 sq feet of cedar.

The company estimates an inventory of oak on hand at the end of June of approximately 500 sq feet .

Monthly fixed overhead and variable cost based on direct labor hour are provided on the table below:

Supervisors salaries

$7500

Direct labor hours for each bed

8 hours

Cost per labor hour

$11.50

Insurance [factory 40%]

$ 1500

Depreciation of equipment [Office]

$1200

Depreciation of store

$ 8500

Predetermined rate based on DHL

$5.00

Actual manufacturing overhead

$250,000

Required

1. Calculate sales budget in $ for each month and total the number of beds sold in May and June

2. Prepare a production budgets in units for each month and in total for May and June

3. Prepare purchases budget in $ for Direct materials for each month and in total for first two months

4. Prepare a direct labour budget for each month and total of the first 2 months

5. Prepare a manufacturing overhead budget for each month and the total for the first two months

6. Calculate period cost of this company.

7. Did the company over-applied or under-applied the manufacturing? What will be the effect on Cost of goods sold?