Production Budgct Problem Jackson Manufting has piojected sales of its product f

Question

Production Budgct Problem Jackson Manufting has piojected sales of its product for the next six months as follows January February March April Projected Sales -300 units 400 units 500 units 600 units 700 units 800 units June The following informaion relates t o the Metro planned production process (1) unit requires: 5 lbs of raw materials 9 hours of direct labor (2) The company tries to maintain an ending finished goods inventory equal to 150% of the following month's sales 60% (3) The company ries to maintain ending raw materia inventory equal to of the current month production needs (4) January's projected beginning inventory is consistent with the company's policy of the appropriate inventory levels to be maintained.* (5) Direct labor rate is assumed to be S15 per hour Required: (a) Prepare a production budget for February, March, and April (b) Prepare a forecast of the units and cost of raw material that will be required for February, March, and Apri The expected cost per pound of raw material is expected to be the following February March April $3.30 $3.40 $3.50 (c) Prepare a direct labor budget for February, March and April

Explanation / Answer

PRODUCTION BUDGET Jan Feb Mar April May Budgeted Sales Units 300 400 500 600 700 Add: Desired Ending Finished inventory 600 750 900 1,050 Total Needs 900 1,150 1,400 1,650 Less: Beginning Finished Inventory 450 600 750 900 Required Production in units 450 550 650 750 RAW MATERIAL PURCHASE BUDGET Jan Feb Mar April Budgeted Production units 450 550 650 750 Raw material req. per unit 5 5 5 5 Total Production needs 2,250 2,750 3,250 3,750 Add: Desired Ending Inventory 1,350 1,650 1,950 2,250 Total needs 3,600 4,400 5,200 6,000 Less: Beginning Inventory 1,350 1,650 1,950 Purchase Units 3,050 3,550 4,050 Cost price per unit 3.30 3.40 3.50 Budgeted Purchase in $ 10,065 12,070 14,175 LABOUR COST BUDGETS Feb Mar April Units to be produced 550 650 750 Labour required per unit 9 9 9 Labour hours 4950 5850 6750 Labuor Rate per hour 15 15 15 Budgeted Labour cost in $ 74,250 87,750 101,250

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