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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 Royal 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 February is summarized as follows:

  1. a. Estimated sales of King and Prince chairs for February by sales territory:
Northern Domestic:  
King  610 units at $780 per unit
Prince  750 units at $550 per unit
Southern Domestic:  
King  340 units at $780 per unit
Prince  440 units at $550 per unit
International:  
King  360 units at $850 per unit
Prince  290 units at $600 per unit
  1. b. Estimated inventories at February 1:
Direct materials:   Finished products:  
Fabric 420 sq. yds. King 90 units
Wood 580 linear ft. Prince 25 units
Filler 250cu.ft.    
Springs 660 units    
  1. c. Desired inventories at February 28:
Direct materials:   Finished products:  
Fabric  390 sq. yds. King 80 units
Wood  650 linear ft. Prince 35 units
Filler  300 cu. ft.    
Springs  540 units    
  1. d.  Direct materials used in production:
In manufacture of King:  
Fabric 6.0 sq. yds. per unit of product
Wood 38 linear ft. per unit of product
Filler 42cu. ft. per unit of product
Springs 16 units per unit of product
In manufacture of Prince:  
Fabric 4.0 sq. yds. per unit of product
Wood 26 linear ft. per unit of product
Filler 3.4 cu. ft. per unit of product
Springs 12 units per unit of product
  1. e.  Anticipated purclia.se price for direct materials:
Fabric $12.00 per sq. yd. Filler $3.00 per cu. ft.
Wood $7.00 per linear ft. Springs $4.50 per unit
  1. f.  Direct labor requirements:
King:  
Framing Department 1.2 hrs. at $12 per hr.
Cutting Department 0.5 hr. at $14 per hr.
Upholstery Department 0.8 hr. at $15 per hr.
Prince:  
Framing Department 1.0 hr. at $12 per hr.
Cutting Department 0.4 hr. at $14 per hr.
Upholstery Department 0.6 hr. at $15 per hr.

 Instructions

  1. 1. .Prepare a sales budget for February.
  2. 2. Prepare a production budget for February.

 3. Prepare a direct materials purchases budget for February.

 4. Prepare a direct labor cost budget for February.

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 February 28.

Explanation

The following table shows the sales budget.

Company R

Sales Budget

For the Month Ending February 28

Product and Area Unit Sales Volume Unit Selling Price ($) Total Sales ($)
(A) (B) (A) × (B)
King:
Northern Domestic 610 780 475,800
Southern Domestic 340 780 265,200
International

2.

To determine

To Prepare: The production budget for the month ending February 28.

3.

To determine

To Prepare: The direct materials purchase budget for the month ending February 28.

4.

To determine

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

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