Question
Port Inc. is preparing its annual budgets for the year ending December 31, 2018. Accounting assistants furnish the data shown below. Product A Product B
Port Inc. is preparing its annual budgets for the year ending December 31, 2018. Accounting assistants furnish the data shown below.
|
| Product A | Product B |
| Sales budget: |
|
|
| Anticipated volume in units | 300,000 | 400,000 |
| Unit selling price | $10 | $15 |
| Production budget: |
|
|
| Desired ending finished goods units | 20,000 | 10,000 |
| Beginning finished goods units | 15,000 | 5,000 |
| Direct materials budget: |
|
|
| Direct materials per unit (pounds) | 4 | 2 |
| Desired ending direct materials pounds | 20,000 | 15,000 |
| Beginning direct materials pounds | 30,000 | 10,000 |
| Cost per pound | $2 | $3 |
| Direct labor budget: |
|
|
| Direct labor time per unit | 0.3 | 0.5 |
| Direct labor rate per hour | $10 | $10 |
| Budgeted income statement: |
|
|
| Total unit cost (DM+DL+MOH) | $8 | $12 |
An accounting assistant has prepared the detailed manufacturing overhead budget and the selling and administrative expense budget. The latter shows selling, general and administrative expenses: variable 5% of sales, fixed $100,000 for product A and B.
Required: (support your answers with an explanation)
- Prepare the following budgets for the year. Show data for each product. You do not need to pre- pare quarterly budgets.
- Sales
- Production
- Direct materials
- Direct labor
- Income statement
- What are the primary benefits of budgeting?
- How does a budget add to good organization?
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