. PRACTICE QUESTIONS Oselkrom Company Limited has the following budgeted sales for the selected four- month period: Sales (units) July 2,000 August Sept October 3,500 2,500 3,000 Additional information Sales price per unit is C180 . . Plans are to have an ending inventory for month equal to 20 percent of the unit sales for the next month. There was 400 units in beginning inventory on July 1st. Three pounds of materials are required for each unit produced. Each pound of material costs c20. Inventory levels for materials equal 30 percent of the needs for the next month. Desired ending inventory for September is 2,520 pounds of material. Beginning inventory for July was 2,070 pounds of material. Each unit requires .6 hours of direct labor and the average wage rate is 16 per hour. Variable overhead rate is c3.50 per direct labor hour. There is also fixed overhead of c2,200 per month. The company pays a 3% commission on sales Company has fixed selling and administrative expenses as follows: Rent Utilities Advertising C600/month 120/month 40/month Office Salaries 3,500/month June 23/2021 a) PRACTICE QUESTION CONT'D Prepare a sales budget for July, August and September and in total for the quarter. b) Prepare production budgets for July, August, and September and in total for the quarter. c) Prepare a direct materials purchases budget in pounds and dollars for July, August, and September and in total for the quarter. d) Prepare a direct labor budget in hours and total cost for July, August and September and in total for the quarter. e) Prepare an overhead budget for July, August and September and in total for the quarter. f) Prepare a selling and administrative expenses budget for July, August and September and in total for the quarter. g) Prepare a proforma income statement for the quarter- a) b) Cost of goods sold is 40% of total sales the company falls into the 35 percent tax bracket for income taxes. 28