Production Budgets:
The Hale Company finished their sales projections for the coming year. The company produces one product. Part of next year’s sales projections are as follows:
|
|
July
|
August
|
September
|
October
|
November
|
|
Projected Sales in units
|
100,000
|
125,000
|
156,000
|
165,000
|
185,000
|
The budget committee has also compiled the following information on inventories:
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Raw materials
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Work-in-Process
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Finished Goods
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Ending Balance, June
|
22,000 lbs
|
None
|
13,000 units
|
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Desired ending levels (monthly)
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5% of next month's production needs
|
None
|
12% of next month's sales
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Engineering has developed the following standards upon which the production budgets will be developed:
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Item
|
Standard
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Materials usage
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5 lbs per unit
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Material price per pound
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$1.50 per pound
|
|
Labor usage
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0.4 hours per unit
|
|
Labor rate
|
$30 per hour
|
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Machine hours
|
3 machine hours per unit
|
The Hale Company uses a modified allocation method for allocating overhead costs. The rates that will be used in the coming year are as follows:
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Overhead item
|
Allocation rate
|
|
Utilities
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$0.50 per machine hour
|
|
Inspection
|
$10 per unit produced
|
|
Factory supplies
|
$2 per unit produced
|
|
Depreciation
|
$35,000 per month
|
|
Supervision
|
$12,000 per month
|
Required:
Prepare the following production budgets for July, August, and September for the Hale Company:
1. Production budget
2. Materials purchase budget
3. Direct labor budget
4. Overhead budget
For the quarter (quarter totals only), prepare the:
5. Cost of goods manufactured budget