Question
Sales, Production, Direct Materials Purchases, and Direct Labor Cost The budget director of Royal British Furniture Company requests estimates of sales, production, and other operating
Sales, Production, Direct Materials Purchases, and Direct Labor Cost
The budget director of Royal British 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 March is summarized as follows:
a. Estimated sales of William and Kate chairs for March by sales territory:
Eastern Domestic: | ||
William | 8,500 units at $800 per unit | |
Kate | 6,000 units at $650 per unit | |
Western Domestic: | ||
William | 6,000 units at $700 per unit | |
Kate | 6,000 units at $550 per unit | |
International: | ||
William | 3,000 units at $600 per unit | |
Kate | 1,000 units at $350 per unit |
b. Estimated inventories at March 1:
Direct materials: | Finished products: | |||||
Fabric | 5,500 | sq. yds. | William | 1,500 | units | |
Wood | 13,700 | lineal ft. | Kate | 300 | units | |
Filler | 3,800 | cu. ft. | ||||
Springs | 3,500 | units |
c. Desired inventories at March 31:
Direct materials: | Finished products: | |||||
Fabric | 9,000 | sq. yds. | William | 2,000 | units | |
Wood | 20,000 | lineal ft. | Kate | 900 | units | |
Filler | 5,000 | cu. ft. | ||||
Springs | 7,500 | units |
d. Direct materials used in production:
In manufacture of William: | |||
Fabric | 4.0 | sq. yds. per unit of product | |
Wood | 16 | lineal ft. per unit of product | |
Filler | 3.8 | cu. ft. per unit of product | |
Springs | 14 | units per unit of product | |
In manufacture of Kate: | |||
Fabric | 2.5 | sq. yds. per unit of product | |
Wood | 12 | lineal ft. per unit of product | |
Filler | 3.2 | cu. ft. per unit of product | |
Springs | 10 | units per unit of product |
e. Anticipated purchase price for direct materials:
Fabric | $9.00 | per sq. yd. | Filler | $1.50 | per cu. ft. | |||
Wood | 5.00 | per lineal ft. | Springs | 2.00 | per unit |
f. Direct labor requirements:
William: | ||
Framing Department | 2.5 hrs. at $15 per hr | |
Cutting Department | 1.0 hr. at $12 per hr. | |
Upholstery Department | 3.0 hrs. at $16 per hr. | |
Kate: | ||
Framing Department | 1.5 hrs. at $15 per hr. | |
Cutting Department | 0.5 hr. at $12 per hr. | |
Upholstery Department | 2.0 hrs. at $16 per hr. |
Required:
1. Prepare a sales budget for March.
Royal British Furniture Company | |||
Sales Budget | |||
For the Month Ending March 31 | |||
Product and Area | Unit Sales Volume | Unit Selling Price | Total Sales |
William: | |||
Eastern Domestic | $ | $ | |
Western Domestic | |||
International | |||
Total | $ | ||
Kate: | |||
Eastern Domestic | $ | $ | |
Western Domestic | |||
International | |||
Total | $ | ||
Total revenue from sales | $ |
Feedback
For each product and each area, multiply the unit sales volume by the unit selling price.
2. Prepare a production budget for March.
Royal British Furniture Company | ||
Production Budget | ||
For the Month Ending March 31 | ||
William Units | Kate Units | |
Expected units to be sold | ||
Plus desired inventory, March 31 | ||
Total | ||
Less estimated inventory, March 1 | ||
Total units to be produced |
Feedback
Expected units to be sold plus desired ending inventory minus estimated beginning inventory equals units produced.
3. Prepare a direct materials purchases budget for March.
Royal British Furniture Company | |||||
Direct Materials Purchases Budget | |||||
For the Month Ending March 31 | |||||
Fabric (sq. yds.) | Wood (lineal ft.) | Filler (cu. ft.) | Springs (units) | Total | |
Required units for production: | |||||
William | |||||
Kate | |||||
Plus desired inventory, March 31 | |||||
Total | |||||
Less estimated inventory, March 1 | |||||
Total units to be purchased | |||||
Unit price | $ | $ | $ | $ | |
Total direct materials to be purchased | $ | $ | $ | $ | $ |
Feedback
For each material and for both products, the production quantity plus the desired ending inventory minus the estimated beginning inventory equals the quantity of direct materials to be purchased. Multiply the quantity by the price per unit.
4. Prepare a direct labor cost budget for March.
Royal British Furniture Company | ||||
Direct Labor Cost Budget | ||||
For the Month Ending March 31 | ||||
Framing Department | Cutting Department | Upholstery Department | Total | |
Hours required for production: | ||||
William | ||||
Kate | ||||
Total | ||||
Hourly rate | $ | $ | $ | |
Total direct labor cost | $ | $ | $ | $ |
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