Sales, Production, Direct Materials Purchases, and Direct Labor Cost Budgets

The budget director of Royal Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for February is summarized as follows:

a. Estimated sales of King and Prince chairs for February by sales territory:

Northern Domestic:

King 610 units at $780 per unit

Prince 750 units at $550 per unit

Southern Domestic:

King 340 units at $780 per unit

Prince 440 units at $550 per unit

International:

King 360 units at $850 per unit

Prince 290 units at $600 per unit

b. Estimated inventories at February 1:

Direct materials:

Fabric 420 sq. yds.

Wood 580 linear ft.

Filler 250 cu. ft.

Springs 660 units

Finished products:

King 90 units

Prince 25 units

c. Desired inventories at February 28:

Direct materials:

Fabric 390 sq. yds.

Wood 650 linear ft.

Filler 300 cu. ft.

Springs 540 units

Finished products:

King 80 units

Prince 35 units

d. Direct materials used in production:

In manufacture of King:

Fabric 6.0 sq. yds. per unit of product

Wood 38 linear ft. per unit of product

Filler 4.2 cu. ft. per unit of product

Springs 16 units per unit of product

In manufacture of Prince:

Fabric 4.0 sq. yds. per unit of product

Wood 26 linear ft. per unit of product

Filler 3.4 cu. ft. per unit of product

Springs 12 units per unit of product

e. Anticipated purchase price for direct materials:

Fabric $12.00 per sq. yd.

Wood 7.00 per linear ft.

Filler $3.00 per cu. ft.

Springs 4.50 per unit

f. Direct labor requirements:

King:

Framing Department 1.2 hrs. at $12 per hr.

Cutting Department 0.5 hr. at $14 per hr.

Upholstery Department 0.8 hr. at $15 per hr.

Prince:

Framing Department 1.0 hr. at $12 per hr.

Cutting Department 0.4 hr. at $14 per hr.

Upholstery Department 0.6 hr. at $15 per hr.

Required:

1. Prepare a sales budget for February.

2. Prepare a production budget for February. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

3. Prepare a direct materials purchases budget for February. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

4. Prepare a direct labor cost budget for February.