Currie Inc. manufactures 2 types of products- product A and B. Below are the mat

Question

Currie Inc. manufactures 2 types of products- product A and B. Below are the material and labor requirements needed to manufacture both products:

The unit production costs for each product are expected to be the same this year and next year. The following production-overhead costs are anticipated for the next year. The predetermined overhead rate is based on the production of 600,000 units for each product. Product overhead is applied on the basis of direct labor hours.

The following selling and administratrive expenses are anticipated for the next year

The sales forecast for next year is as follows:

The following inventory information is available for the next year:

Expected Inventory Jan1

Prepare a master budget for Currie Inc. Corporation for the next year. Include the following:

1. Sales budget

2. Production budget

3. Direct Material budget

4. Direct labor budget

5. Production overhead budget

6. Selling and administrative expense budget

7. Budgeted income statement

Product A Product B direct materials per pound Material A (10 cents per pound) 2 5 Material B (15 cents per pound) 3 1 Direct labor at $15 per hour .45 hour .50 hour

Explanation / Answer

Answer 1 Sales Budget Product Sales (unit) Price per unit Sales ($) A 600000 15 9000000 B 600000 25 15000000 Total 1200000 24000000 2 Production Budget Product A B Sales 600000 600000 Closing Inventory 24000 12000 Total Needs 624000 612000 Beginning Inventory 15000 18000 Total production 609000 594000 3(1) Direct Raw Material Budget (A) Product A B Total Total production 609000 594000 1203000 Material used per unit 2 5 Material required for production 1218000 2970000 4188000 Closing Inventory 5000 Total Needs 4193000 Beginning Inventory 16000 Net Needs 4177000 Rate per pound 0.10 Total purchase value 417700 3(2) Direct Raw Material Budget (B) Product A B Total Total production 609000 594000 1203000 Material used per unit 3 1 Material required for production 1827000 594000 2421000 Closing Inventory 13000 Total Needs 2434000 Beginning Inventory 12000 Net Needs 2422000 Rate per pound 0.15 Total purchase value 363300 4 Direct Labor Budget Product A B Total Total production 609000 594000 1203000 Labor hour per unit 0.45 0.5 Total labor hour required 274050 297000 571050 Rate of labor hour 15 Total cost of labor hour 8565750 5 Production overhead Budget Product A B Total Indirect Material 539894 585106 1125000 Indirect Labor 431915 468085 900000 Associated Building Cost 729456 790544 1520000 Depreciation 68147 73853 142000 Total production Over head 1769411 1917589 3687000 Labor hour rate 6.46 6.46 6 Selling & Administrative Exp. Budget Product A B Total Total Sales (units) 600000 600000 1200000 Sale forces 30000 30000 60000 Market & Advertising 900000 1500000 2400000 Other Administrative Salary 76500 76500 153000 Total selling & Admin cost 1006500 1606500 2613000 7 Budgeted Income statement Product A B Total Units 600000 600000 1200000 Sales Revenue 9000000 15000000 24000000 Direct Material (A) 120000 300000 420000 Direct Material (B) 270000 90000 360000 Direct Labor 4050000 4500000 8550000 Production Overhead 1743262 1936958 3680221 Selling & Administrative Exp. 1006500 1606500 2613000 Total Expenditure 7189762 8433458 15623221 Net Income 1810238 6566542 8376779

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