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Chapter 7 Budgeting 34 Problem Selected information concerning sales and production for Cabot Co. for July are summarized as follows: A. Estimated sales: Product K: 40,000 units at $30 per unit Product L: 20,000 units at $65 per unit B. Estimated inventories, July 1: Material A: 4,000 lbs. Product K: 3,000 units at $17 per unit $ 51,000 Material B: 3,500 lbs. Product L: 2,700 units at $35 per unit 94,500 Total $ 145,500 There were no work in process inventories estimated for July. C. Desired inventories at July 31: Material A: 3,000 ibs. Product K: 2,500 units at $17 per unit $ 42,500 Material B: 2,500 lbs. Product L: 2,000 units at $35 per unit 70,000 Total $112,500 There were no work in process inventories desired for July 31. D. Direct materials used in production: Product K Product L Material A: 0.7 lb. per unit 3.5 lbs. per unit Material B: 1.2 lbs. per unit 1.8 lbs. per unit E. Unit costs for direct materials: Material A: $4.00 per lb. Material B: $2.00 per lb. F. Direct labor requirements: Department 1 Department 2 Product K 0.4 hr. per unit 0.15 hr. per unit Product L 0.6 hr. per unit 0.25 hr. per unit G. Department 1 Department 2 Direct labor rate $12 per hr. $16 per hr. H. Estimated factory overhead costs for July: Indirect factory wages $200,000 Depreciation of plant and equipment 40,000 Power and light 25,000 Indirect materials 34,000 Total $299,000 Instructions 1. Prepare a sales budget for July. 2. Prepare a production budget for July. 3. Prepare a direct materials purchases budget for July. 4. Prepare a direct labor cost budget for July. 5. Prepare a cost of goods sold budget for July. Need more practice? Find additional multiple choice questions, exercises, and problems in CengageNOW 2