tles During July of the current year to prepare August manufacturing and income

Question

tles During July of the current year to prepare August manufacturing and income statement bu 1,500 cases at $100 per case for Finished Goods Inventory: 70 , the management of Genuine Spice Inc. asked the controller budgets. Demand was expected to be August. Inventory planning information is provided as follows: 8.070 Cases Cost Estimated finished goods inventory, August 1 Desired finished goods inventory, August 31 300 175 $12,000 7,000 Materials Inventory Bottles Estimated materials inventory, August Desired materials inventory, August 31 Cream Base (ozs.) 250 1,000 Oils ozs.) (bottles) 290 360 600 240 There was negligible work in process inventory assumed for either the beginning or end of the month; thus, none was assumed. In addition, there was no change in the cost per unit or estimated units per case operating data from January Instructions 5. Prepare the August production budget 6. Prepare the August direct materials purchases budget. 7. Prepare the August direct labor budget. Round the hours required for production to the nearest hour. 8. Prepare the August factory overhead budget. 9. Prepare the August budgeted income statement, including selling expenses

Explanation / Answer

Production budget:

Particulars

Units

Expected demand for August

1500

Add: Closing inventory of Augusts

175

1675

Less: Opening inventory of August

300

Production budget for August

1375

Direct material purchase budget

Cream base

Oils

Bottles

Direct materials for production of August

1500

1500

1500

Add: Closing desired materials inventory

1000

360

240

2500

1860

1740

Less: Opening materials inventory

250

290

600

Direct material purchase budget

2250

1570

1140

Labour budget for August

Number of units to be manufactured

1375

Assuming each unit requires 2 hours

Budgeted direct labour hours (1375 x 2)

2750

Factory overhead budget

Assuming $5 per hour

Factory overhead ( 2750 x 5)

13750

Budgeted income statement

Sales

150000

Less: Cost

(12000 x 1500 / 300)

60000

Gross profit

90000

Less: Selling expenses (1500 x 6)

9000

Expected net profit before tax

81000

Production budget:

Particulars

Units

Expected demand for August

1500

Add: Closing inventory of Augusts

175

1675

Less: Opening inventory of August

300

Production budget for August

1375

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