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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Sales, production, direct materials purchases, and direct labor cost budgets

 The budget director of Gourmet Grill 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:

  1. a. Estimated sales for March by sales territory:
Maine:  
Backyard Chef  350 units at $800 per unit
Master Chef  200 units at $1,400 per unit
Vermont:  
Backyard Chef  400 units at $825 per unit
Master Chef  240 units at $1,500 per unit
New Hampshire:  
Backyard Chef  320 units at $850 per unit
Master Chef  200 units at $1,600 per unit
  1. b. Estimated inventories at March 1:
Direct materials: Finished products:
Grates  320 units Backyard Chef  30 units
Stainless steel  1.700 lb. Master Chef  36 units
Burner subassemblies 190 units    
Shelves 350 units    
  1. c. Desired inventories at March 31:
Direct materials:   Finished products:  
Grates  300 units Backyard Chef  40 units
Stainless steel 1,500 lb. Master Chef  26 units
Burner subassemblies  210 units    
Shelves  400 units    
  1. d. Direct materials used in production:
In manufacture of Backyard Chef:  
Grates  3 units per unit of product
Stainless steel  24 lb. per unit of product
Burner subassemblies  2 units per unit of product
Shelves  4 units per unit of product
In manufacture of Master Chef:  
Grates  6 units per unit of product
Stainless steel  42 lb. per unit of product
Burner subassemblies  4 units per unit of product
Shelves  S units per unit of product
  1. e. Anticipated purchase price for direct materials:
Grates $16 per unit Burner subassemblies $120 per unit
Stainless steel $8 per lb. Shelves $12 per unit
  1. f. Direct labor requirements:
Backyard Chef:  
Stamping Department  0.50 hr. at $18 per hr.
Forming Department  0.60 hr. at $16 per hr.
Assembly Department  1.00 hr. at $15 per hr.
Master Chef:  
Stamping Department  0.60 hr. at $18 per hr.
Forming Department  0.80 hr. at $16 per hr.
Assembly Department  1.50 hrs. at $15 per hr.

 Instructions

  1. 1. Prepare a sales budget for March.
  2. 2. Prepare a production budget for March.
  3. 3. Prepare a direct materials purchases budget for March.
  4. 4. Prepare a direct labor cost budget for March.

1.

To determine

Budgeting is a process to prepare the financial statement by the manager to estimate the organization’s future actions. It is also helpful to satisfy the everyday activities.

To Prepare: The sales budget for the month ending March 31.

Explanation

The following table shows the sales budget.

Company G

Sales Budget

For the Month Ending March 31

Product and Area Unit Sales Volume Unit Selling Price ($) Total Sales ($)
(A) (B) (A) × (B)
Backyard Chef:
M 350 800 280,000
V 400

2.

To determine

To Prepare: The production budget for the month ending March 31.

3.

To determine

To Prepare: The direct materials purchase budget for the month ending March 31.

4.

To determine

To Prepare: The direct labor cost budget of Company G.

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