Ash Creek Company is preparing its master budget for 2014. Relevant data pertain

Question

Ash Creek Company is preparing its master budget for 2014. Relevant data pertaining to its sales, production, and direct materials budgets are as follows.

Sales: Sales for the year are expected to total 1,000,000 units. Quarterly sales are 20%, 24%, 26%, and 30%, respectively. The sales price is expected to be $41 per unit for the first three quarters and $45 per unit beginning in the fourth quarter. Sales in the first quarter of 2015 are expected to be 15% higher than the budgeted sales for the first quarter of 2014.

Production: Management desires to maintain the ending finished goods inventories at 19% of the next quarter’s budgeted sales volume.

Direct materials: Each unit requires 2 pounds of raw materials at a cost of $10 per pound. Management desires to maintain raw materials inventories at 20% of the next quarter’s production requirements. Assume the production requirements for first quarter of 2015 are 494,500 pounds.

Ash Creek budgets 0.2 hours of direct labor per unit, labor costs at $11.00 per hour, and manufacturing overhead at $17.00 per direct labor hour. Its budgeted selling and administrative expenses for 2014 are $6,591,000.

Explanation / Answer

Quarter 1 2 3 4 Total Expected Sales: (%) 20% 24% 26% 30% 100% Sales (Units) 200000 240000 260000 300000 1000000 Sales Price Per Unit $41 $41 $41 $45 Sales Value $8,200,000 $9,840,000 $10,660,000 $13,500,000 $42,200,000 Sales (Units) 200000 240000 260000 300000 1000000 Add: Closing Stock: 19%*(2400000; 260000;30000; 200000*1.15*19%) 45600 49400 57000 43700 195700 Less: Opening Stock 0 0 0 0 Production Units 245600 289400 317000 343700 1195700 Production Units 245600 289400 317000 343700 Material Required Per Unit (Pounds) 2 2 2 2 Total Production Requirement (Pounds) 491200 578800 634000 687400 Cost per Pound 10 10 10 10 Total Raw Material Cost: (A) 4912000 5788000 6340000 6874000 23914000 Production Units 245600 289400 317000 343700 Direct Labour Hours Per Unit 0.2 0.2 0.2 0.2 Total Direct Labour Hours required 49120 57880 63400 68740 Labour Cost per hour 11 11 11 11 Total Direct Labour Cost: (B) 540320 636680 697400 756140 2630540 Total Direct Labour Hours required 49120 57880 63400 68740 Manufacturing Overhead per direct labour hour 17 17 17 17 Total Manufacturing overhead cost (C ) 835040 983960 1077800 1168580 4065380 Total Manufacturing cost (A +B+C) 30609920 Budgeted Selling and administrative expense (D) 6591000 Total Cost ( A+B+C+D) 37200920

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.