Scenario: Production, Purchase, and Labor Budgets

The Simmons Company finished their sales projections for the coming year. The company produces one product. Part of next year's sales projections are as follows.

Projected Sales in Units

July125,000August145,000September139,000October155,000November180,000

The budget committee has also completed the following information on inventories.

Raw Materials

Ending Balance, June, 50,000 lbs

Desired ending levels (monthly 10% of next month's production needs)

Work-In-Progress

None

Finished Goods Inventory

Ending Balance, June, 22,000 units

Desired ending levels: 20% of next month's sales

The Engineering Department has developed the following standards upon which the production budgets will be developed.

ItemStandardMaterial usage3 pounds per unitMaterial price per pound$2.00 per poundLabor usage0.5 hours per unitLabor rate$40 per hourMachine hours2 machine hours per unit

The Simmons Company uses a modified allocation method for allocating overhead costs. The rates that will be used in the coming year are as follows.

Overhead ItemAllocation RateUtilities$0.70 per machine hourInspection$10 per unit producedFactory supplies$4 per unit producedDepreciation$60,000 per monthSupervision$25,000 per month

Assignment Details

Important!

It is expected that the assignment will be completed using an Excel spreadsheet using formulas.

Prepare the following production budgets for July, August, September, and for the quarter for the Simmons Company.

1. Production Budget
2. Materials Purchases Budget
3. Direct Labor Budget
4. Overhead Budget
5. Manufactured Budget (for the quarter, quarter totals only)