Q2: SALES ANDPRODUCTIONBUDGETS

GOOD Company produces a variety of backpacks. Two popular types are the Casual and the Cool. The Casual, meant for people who travel frequently, sells for $50, and the Cool, a new model designed for school children, sells for $30. Projected sales of the two types of backpacks for the coming four quarters are

as follows:

	Casual	Cool
First quarter	15,000	84,000
Second quarter	16,500	24,500
Third quarter	20,000	98,000
Fourth quarter	25,500	35,000

The president of the company believes that the projected sales are realistic and can be achieved by the company. In the factory, the production supervisor has received the projected sales figures and gathered information needed to compile production budgets. He found that 1,300 units Casual and 1,170 units Cool were in inventory on January 1. Company policy dictates that ending inventory should equal 20 percent of the next quarter's sales Casual and 10 percent of next quarter's sales for Cool.

Required:

1. Prepare a sales budget for each quarter and for the year in total. Show sales by product and in total for each period.
2. What factors might GOOD Company have considered in preparing the sales budget?
3. Prepare a separate production budget for each product for each of the first three quarters of the year.

Q3: PRODUCTION, DIRECTLABOR, DIRECTMATERIALS, SALESBUDGETS, BUDGETEDCONTRIBUTIONMARGIN

BOLD makes and sells high-quality glare filters for microcomputer monitors. The controller is responsible for preparing the company's master budget and has assembled the following data for 2022.

As of March 1, the company's union contract calls for an increase in direct labor wages that is included in the direct labor rate. The Company expects to have 10,000 glare filters in inventory at December 31, 2021, and has a policy of carrying 50 percent of the following month's projected sales in inventory.

	January 2022	February 2022	March 2022	April 2022
Estimated unit sales	20,000	24,000	16,000	18,000
Sales price per unit	$80	$80	$75	$75
Direct labor hours per unit	4.0	4.0	3.5	3.5
Direct labor hourly rate	$15	$15	$16	$16
Direct materials cost per unit	$10	$10	$10	$10

Required:

1. Prepare the following monthly budgets for BOLD Company for the first quarter of 2022. Be sure to show supporting calculations.
   1. Sales budget
   2. Production budget in units
   3. Direct labor budget in hours
   4. Direct materials cost budget
2. Calculate the total budgeted contributions margin for BOLD Company for the first quarter of 2022. Be sure to show supporting calculations. (CMA adapted)

Q4: OPERATINGBUDGET, COMPREHENSIVEANALYSIS

LANTERN Manufacturing, Inc., produces control valves used in the production of oil field equipment. The control valves are sold to various gas and oil engineering companies. Projected sales in units for the coming four months are as follows:

January 20,000

February 25,000

March 30,000

April 30,000

The following data pertain to production policies and manufacturing specifications followed by LANTERN:

1. Finished goods inventory on January 1 is 13,000 units. The desired ending inventory for each month is 70 percent of the next month's sales.

1. The data on materials used are as follows:

Direct Material	Per-Unit Usage	Unit Cost ($)
Part 714 Part 502	5 3	4 3

Inventory policy dictates that sufficient materials be on hand at the beginning of the month to produce 50 percent of that month's estimated sales. This is exactly the amount of material on hand on January 1.

1. The direct labor used per unit of output is two hours. The average direct labor cost per hour is $15.

1. Overhead each month is estimated using a flexible budget formula. (Activity is measured in direct labor hours.)

	Fixed Cost	Variable Cost
Supplies Power Maintenance Supervision Depreciation Rental Other	$ 28,000 14,000 100,000 7,000 56,000	$1.00 0.20 1.10 1.60

1. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Activity is measured in units sold.)

	Fixed Costs	Variable Costs
Salaries Commissions Depreciation Shipping Other	$30,000 5,000 10,000	$0.75 2.60 0.40

1. The unit selling price of the control valve is $90.

Required:

Prepare a monthly operating budget for the first quarter with the following schedules:

1. Sales budget
2. Production budget
3. Direct materials purchase budget
4. Direct labor budget
5. Overhead budget
6. Selling and administrative expense budget
7. Ending finished goods inventory budget
8. Cost of goods sold budget
9. Budgeted income statement (ignore income taxes)