Question 1 - Production and Related Budgets
Acclaim Kitchen Furnishings Company manufactures vinyl kitchen settings. The budget committee is preparing budgets for production, materials, and labor for the year ended June 30, 2012.
The forecast sales in units by quarter are:
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July, August & September, 2011
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(1st Quarter)
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4,500 units
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October, November & December, 2011
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(2nd Quarter)
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2,750 units
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January, February & March, 2012
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(3rd Quarter)
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3,500 units
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April, May & June, 2012
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(4th Quarter)
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2,500 units
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July, August & September, 2012
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(1st Quarter)
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3,000 units
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An ending inventory balance of direct materials (vinyl and steel and timber tops kits) to equal to 15% of the next quarter's production requirements is maintained. The ending balance of finished goods has to equal to 20% of the next quarter's forecast sales. The projected direct material and finished goods inventory balances as at July 1, 2011 were:
Vinyl - 2,650 feats
Steel and timber tops kits - 400 units
Finished goods - 900 units
The direct materials and labor requirements to produce one unit of vinyl kitchen setting are as follows:
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Direct material / labor
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Quantity Required
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Labor Cost
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Cutting
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1.5 hour
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$8.50 per hour
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Assembly
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2 hour
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$10 per hour
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Vinyl
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6 feet
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$6 per feet
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Tabular steel and timber top kit
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1 unit
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$32 per unit
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Required:
a) Prepare the production budget in units for the first three quarters of 2011/2012.
b) Prepare the direct materials budget for the first three quarters of 2011/2012,
c) Prepare the direct labor budget for the first three quarters of 2011/2012.
Question 2 - Direct Labor Budget
Dalby Manufacturing Ltd aims to have a monthly ending inventory balance equals to 55% of projected sales of the following month. The ending inventory balance on July 31 was 600 units. Projected sales for August, September, and October were 1,000, 1,500 and 800 units respectively. Labor requirements to produce each unit are as follows:
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Time required (hrs)
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Rate per hour
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Assembler
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3.0
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$0
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Welder
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2.6
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$12
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Finisher
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4.0
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$8
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Required: Prepare a direct labor budget (in hours and dollars) for the month of August and September 2012.