Sales Budget

The marketing department has estimated sales as follows for the remainder of

the year: $($Actual sales in June were $5,000$ units$)$

July $8,000$ October

August $15,000$ November

September $12,000$ December

The selling price of a SUPER DUPER widget is $$35$ and all sales are on account.

Based on past experience, sales are collected in the following pattern:

$40\%$ in the month of sale

$55\%$ in month following the sale

$5\%$ are never collected $($uncollectible$)$

Vaughan Company

Sales Budget

$3$rd Quarter June July August September

Sales in Units $5,0008,00015,00012,000$

Selling Price per Unit $35353535$

Total Sales in $ $175,000280,000525,000420,000$

Cash Collections

June's Cash Collections $70,000$

July's Cash Collections $154,000210,000$

August's Cash Collections $288,750$

September's Cash Collections $231,000$

Total Cash Collections

Production Budget

The company maintains a finished goods inventory equal to $5\%$ of the following

month's sales. The inventory of finished goods on July $1$ is as it should be$.$

Vaughan Company

Production Budget Total

$3$rd Quarter July August September $3$rd Quarter

Budgeted Sales in Units $8,00015,00012,00035,000$

Add: Desired Ending Inventory $4007506001,750$

Total Needs $8,40015,75012,60036,750$

Less: Beginning Inventory $8,00015,00012,00035,000$

Required Production $4007506001,750$

Raw Materials Purchasing Budget

Each unit of SUPER DUPER widget requires $0\mathrm{.}8$ pounds of WHAM compound. To

prevent shortages, the company would like the inventory of WHAM compound on hand

at the end of each month to equal $30\%$ of the following month's production needs.

The inventory on July $1$ is $2,004$ pounds.

WHAM compound costs $$5\mathrm{.}00$ per pound and Vaughan pays for $70\%$ of its purchases

in the month of purchase; the remainder is paid in the following month. $$50,400$

of WHAM compound was purchased in June and $70\%$ was paid for in June.

Vaughan Company

RM Purchasing Budget Total

$3$rd Quarter July August September $3$rd Quarter

Required Production $7,3502,5202,88012,750$

RM per Unit $0\mathrm{.}080\mathrm{.}080\mathrm{.}080\mathrm{.}08$

Production Needs $548216230994$

Add: Desired Ending Inventory $405203191799$

Total Needs $9534194211,793$

Less: Beginning Inventory $-$

RM to be Purchased $2,0044052032,612$

Cost of RM per pound $15151545$

Cost of RM to be Purchased $ $30,060$ $ $6,075$ $ $3,045$ $ $39,180$

Cash Disbursements for RM $2$

June's RM Purchases

July's RM Purchases

August's RM Purchases

September's RM Purchases

Total Disbursements

The next Budget is the Direct Labor Budget. Let's assume that each unit takes

$0\mathrm{.}6$ DLH to make and each DLH costs $$15.$ Let's further assume that labor is paid

in the month incurred.

Vaughan Company

DL Budget Total

$3$rd Quarter July August September $3$rd Quarter

Budgeted Production in Units $7,3502,5202,88012,750$

DLH per Unit $1111$

Total DLH needed $4,4101,5121,7287,650$

Cost per DLH $15151515$

Total Direct Labor Cost $66,15022,68025,920114,750$

Next we will prepare our FOH budget. FOH is applied based on DLH$.$ Estimated

variable FOH is expected to be $$420,000$ and estimated DLH are expected to be

$300,000.$ Fixed FOH is estimated to be $$9,100$ per month with $$2,000$ of that amount

being depreciation of factory equipment and building. Like DL$,$ assume that FOH is

paid in the month incurred.

Vaughan Company

FOH Budget Total

$3$rd Quarter July August September $3$rd Quarter

Budgeted DLH $4,4101,5121,7287,650$

Variable FOH rate $ $4\mathrm{.}20$ $ $4\mathrm{.}20$ $ $4\mathrm{.}20$ $ $4\mathrm{.}20$

Total Budgeted Variable FOH $18,5226,3507,25832,130$

Total Budgeted Fixed FOH $27,3009,1009,10045,500$

Total Budgeted FOH $45,74215,45016,37977,572$

Less: Depreciation $(6,000)(2,000)(2,000)(10,000)$

Cash Needed for FOH $ $39,742$ $ $13,450$ $ $14,379$ $ $67,572$

$2$

Total FOH per Budget

Budgeted DLH this period

Predetermined FOH per DLH