Packers sells its rock-climbing shoes worldwide. Packers expects to sell 8,000 p
ID: 2570076 • Letter: P
Question
Packers sells its rock-climbing shoes worldwide. Packers expects to sell 8,000 pairs of shoes for $175 each in January, and 2,000 pairs of shoes for $220 each in February. Packers' production cost per pair of shoes is budgeted at $85 in direct materials cost, $56 in direct labor cost, and $24 in variable manufacturing overhead cost per shoe. Additionally, its monthly fixed overhead budget is $26,000 of which $4,000 represents depreciation, and the company expects to sell 4,300 pairs of shoes in March for $290 each. Packers has no beginning finished goods inventory for the first quarter but desires ending finished goods inventory to be 40% of the following months' sales. Packers maintains no direct materials inventory. April sales are projected to be 8,000 pairs of shoes. Selling and administrative expenses total $5,100 per month.
Sales Budget
January February Total
Sales price per pair $175 $220
Number of pairs 8,000 2,000
Total sales $1,400,000 $440,000 $1,840,000
Requirement
1.
Packers'production budget, direct materials budget, direct labor budget, and manufacturing overhead budget for January, February, and March.
1.
Use this information and the sales budget to preparePackers'production budget, direct materials budget, direct labor budget, and manufacturing overhead budget for January, February, and March.
Explanation / Answer
Solution:
1) Production Budget
Production Budget
January
February
March
Expected Units to be sold
8,000
2,000
4,300
Plus: Desired Finished Goods Ending Inventory (40% of next month's sales)
800
1720
3,200
(8000*40%)
Total Needs
8800
3720
7,500
Less Beginning Finished Goods Inventory (Ending inventory of last month)
0
800
1720
Budgeted Production in units
8800
2920
5,780
2) Direct materials budget
Direct Materials Budget
January
February
March
Budgeted Production Units i.e. Required Purchases
8800
2920
5,780
Direct material cost per unit
$85
$85
$85
Budgeted Direct materials purchases in dollars
$748,000
$248,200
$491,300
3) Direct labor budget
Budgeted Direct Labor Cost
January
February
March
Budgeted Production Units
8,800
2,920
5,780
Direct Labor Cost per unit
$56
$56
$56
Budgeted Direct Labor Cost
$492,800
$163,520
$323,680
4) Manufacturing overhead budget
Budeted Manufacturing Overhead
January
February
March
a
Budgeted Production Units (From part 1)
8800
2920
$5,780
b
Variable Manufacturing Overhead Rate per production unit
$24
$24
$24
c = a*b
Variable Manufacturing Overhead
$211,200
$70,080
$138,720
d
Fixed Manufacturing Overhead
$26,000
$26,000
$26,000
c+d
Total Budgeted Manufacturing Overhead
$237,200
$96,080
$164,720
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Production Budget
January
February
March
Expected Units to be sold
8,000
2,000
4,300
Plus: Desired Finished Goods Ending Inventory (40% of next month's sales)
800
1720
3,200
(8000*40%)
Total Needs
8800
3720
7,500
Less Beginning Finished Goods Inventory (Ending inventory of last month)
0
800
1720
Budgeted Production in units
8800
2920
5,780
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