1. Merchant Co. expects to sell 10,000 units at $120 each. Each unit is expected
ID: 2424783 • Letter: 1
Question
1. Merchant Co. expects to sell 10,000 units at $120 each. Each unit is expected to require 2lbs. of material @ $10/lb. and 3 direct labor hours @ $5/DLH. The overhead rate is estimated to be $15/DLH. The beginning inventories are: DM 1,000 lbs. and Finished Goods 2,000 units. The budgeted ending inventories are: DM 2,000 lbs. and Finished Goods 1,000 units.
What is Merchant Co's budgeted sales (in $)?
What is Merchant Co's budgeted production (in units)?
Assuming a production of 9,500 units, what is the budgeted materials purchase (in lbs.& $)?
Based on your answer to (2), what is the budgeted cost per unit?
Based on your answer to (2), what is the budgeted cost of goods sold?
Based on your answer to (2), what is the budgeted cost for DL & FOH respectively?
Problem 2
Country Heather manufactures flower pots. It expects to sell 26,000 pots in 2014. The company had enough beginning inventory of direct materials to produce 8,000 pots and wants to maintain an ending direct materials inventory to produce 12,000 pots. Beginning inventory of finished pots totaled 2,000 pots and the company had a desired ending inventory of finished pots of 3,000 pots. The pots sell for $12 each. Direct material cost is $2.50 per pot, direct labor cost is $1.35 per pot, and factory overhead is 85¢ per pot.
Determine the budgeted sales for 2014 (in $)
Determine the budgeted production for 2014 (in pots)
Determine the budgeted cost of goods sold for 2014 (in $)
Determine the budgeted cost for DM, DL, & FOH for 2014.
Problem 3
Maddox Co's forecast of sales is as follows: October $40,000; November $80,000; December $120,000. Sales are 70% cash and 30% credit in any month. Credit sales are collected in full in the following month.
Determine the budgeted cash receipts for each of the 3 months?
Calculate the balance of Accounts Receivable on October 31 & November 30?
Explanation / Answer
1.
Budgeted saes should be computed by multiplying the expected number of units to be sold by the selling price per unit.
Budgeted sales = 10,000 units × $120 = $1,200,000
The budgeted production should be computed by subtracting the units of begining inventory of finished goods fromthe sum of expected number of units to be sold and the desired ending invntory of finished goods.
Budgeted poduction = 10,000 units + 1,000 units - 2,000 units = 9,000 units
One units of finished goods requires 2 lbs. of material. Therefore, 9,500 units of finished goods will require 1,9000 (9,500 × 2) lbs. of materials. Cost per lb. is $10. Thus, cost of 19,000 lbs. of materials will be $190,000.
Budgeted materials purchases = $190,000
Budgeted cost per unit will be the sum of materials cost per unit, direct labor cost per unit and overhead cost per unit.
Materials cost per unit = 2 lbs. × $10 = $20
Direct labor cost per unit = 3 direct labor-hours × $5 = $15
Overhead cost per unit = 3 direct labor-hours × $15 = $45
Therefore, Cost per unit = $20 + $15 + $45 = $80
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