Gina\'s Inc. makes custom shirts. They have provided us with their forecast for

Question

Gina's Inc. makes custom shirts. They have provided us with their forecast for the first 5 months:

January          100,000 units
February        150,000 units
March             180,000 units

April                120,000 units

May                 105,000 units

At the beginning of January, there were 20,000 units on hand. They want to have a desired ending inventory at the end of each month that is equal to 20% of next month sales.

Each shirt requires 8 feet of materials. At the beginning of January, there was 44,000 feet of materials available for use. At the end of each month, they want to have a desired ending inventory of materials that are equal to 10% of the following month’s production needs.

Each shirt requires 2 hours of labor. Employees are paid $17 per hour (including all benefits).

Required:

Must show calculations.

Prepare a production budget by month for the first quarter of the year.

Prepare a direct materials budget by month for the first quarter of the year.

Prepare a direct labor budget by month for the first quarter of the year.

Explanation / Answer

Production Budget Particulars Jan Feb Mar Apr May Total=Jan+Feb+Mar Sales in Units            100,000.00            150,000.00            180,000.00            120,000.00            105,000.00                       430,000.00 Opening Inventory= Cl inv of prev month              20,000.00              30,000.00              36,000.00              24,000.00              21,000.00                         20,000.00 Closing Inv @20% next mnth sales              30,000.00              36,000.00              24,000.00              21,000.00                         24,000.00 Production= Sales+Cl-Op            110,000.00            156,000.00            168,000.00            117,000.00                       434,000.00 Materials Budget Particulars Jan Feb Mar Apr May Total=Jan+Feb+Mar Production= Sales+Cl-Op            110,000.00            156,000.00            168,000.00            117,000.00                       434,000.00 Materials Reqd @8 pu            880,000.00        1,248,000.00        1,344,000.00            936,000.00                             -                     3,472,000.00 Opening Materials              44,000.00            124,800.00            134,400.00                         44,000.00 Closing Mat @10% of next mnth prod            124,800.00            134,400.00              93,600.00                         93,600.00 Purchases in Units = Cl +Prod-op            960,800.00        1,257,600.00        1,303,200.00                   3,521,600.00 Labour Budget Particulars Jan Feb Mar Apr May Total=Jan+Feb+Mar Production= Sales+Cl-Op            110,000.00            156,000.00            168,000.00            117,000.00                       434,000.00 DL hours @2 per unit            220,000.00            312,000.00            336,000.00                       868,000.00 DL Cost @17 per hour        3,740,000.00        5,304,000.00        5,712,000.00                 14,756,000.00

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