What the Scrap Steel Co. produces and sells steel doors with budgeted or standard costs as follows:

Inputs:	Standards:
Direct Materials	100 lbs per door; $0.40 per pound
Direct Labor Variable Overhead Rate	10 hrs per door; $23.00 per hour 10 hrs per door; $27.60 per hour
Fixed Overhead Costs	$26,000 per month

Depreciation is a non-cash expense and is valued at $1,000 and is included in the Fixed OH cost above.

Unit Sales for the prior and future months are budgeted as follows:

July	August	September
280	250	270

The desired Ending Inventory of Materials is 5% of the materials needed for production for the following month. The desired Ending Inventory of Finished Goods is 10% of production for the following month. The Ending Inventory for June was 28 units. The cost per unit for June was $ 386 per unit.

The budgeted sales price is $1,200 per steel door. Sales are budgeted as 100% credit sales. According to previous recorded collections, Scrap Steel determined that 55% of sales are collected during the month of sale; 43% are collected in the following month; 2% are uncollectible. June Accounts receivable were $129,000 and will be collected in full during July.

The materials purchases are 100% credit 70% in month of purchase and 30% in the following month.

The beginning Accounts Payable is $5,500.

Selling and Administrative expenses are:

Variable Selling and Administrative Expenses	$50 per unit sold
Fixed Selling and Administrative Expenses	$15,000 per month

Selling and Administrative depreciation is a noncash expense that is at a rate of $750 per month that is included in the fixed expenses above.

The following information for the cash account follows:

Beginning Cash Balance $165,000

Dividend Paid 30,000

Capital Expenditures 153,000

Scrap Steel requires a minimum ending cash balance of $1,500.

A partial master budget for July as follows.

Sales budget for July

Units to be sold in July: 280 units

Sales price per unit: x $1,200 per steel

Sales Budget for July= $336,000

Production budget for July

Sales Units: 280

Desired ending inventory: + 25 units (10% * 250 units)

Beginning inventory 28 units

Required production =277 units

Direct material quantity needed for production

Required production: 277 units

Production units required: X 100lbs

Direct material quantity needed for production= 27,700lbs

Direct material quantity to be purchased for July

Direct material quantity needed for production: 27,700lbs

Desired ending inventory of materials (August): +1,350 (5%*27,000 lbs)

Beginning inventory of materials: -1,400 lbs (5% x 28,000lbs)

Material Quantity to be purchased: 27,650 lbs

Cost per pound of material: x $0.40

Total cost of materials purchases: $11,060

Budged cost of direct material purchases for July

Material used in production: 27,700lbs

Cost per pound of material: x$0.40

Cost of materials used= $11,080

Direct labor needed for production

Labor hrs required per unit: 10 hrs

Required production: 277 units

Total labor hrs needed: 2,770 hrs

Labor rate per hour: x$23

Total cost of direct labor: $63,710

Budgeted factory overhead costs

Fixed Overhead costs: $26,000

Total variable overhead: + $7,645.20 (277 * 27.60)

Total factory overhead costs = $33,645.20

Budgeted cost of goods sold

Direct materials used: $11,080

Direct labor costs: $63,710

Factory overhead + $33,645.20

Cost of goods sold = $108,435.20

Budgeted selling and administrative costs

Expenses: $14,000 ( $50 * 280)

Fixed selling and administrative expenses: +$15,000

Total selling and administrative costs: = $29,000

Required:

1. Budgeted income statement
2. Prepare a cash budget; include cash receipts and disbursements
3. Budgeted cost of direct labor

Total labor hours needed

Labor rate per hour X

Total cost of direct labor =

Keep track of the tougher aspects