You have recently been hired by Pull Company as a managerial accountant. It has not used budgets in the past, but is expecting large growth in the next year and needs to get a loan to pay for the expansion. In order to determine the loan amount, your manager asks you to prepare the following budgets:
Sales budget
Production budget
Direct materials purchases budget
Direct labor budget
Overhead budget
Directions: Prepare each budget of this assignment in one Excel file. Be sure to show your calculations and label your work for full credit.
The Pull Company estimates for the next year are as follows:
Quarter 1 Sales: 500,000 units
Quarter 2 Sales: 750,000 units
Quarter 3 Sales: 1,000,000 units
Quarter 4 Sales: 800,000 units
Quarter 1 of the following year Sales: 600,000 units
Price of the product: $20
Beginning finished goods inventory: 50,000 units
The company policy is to have 10% of next quarter's sales in ending inventory
The product contains only 2 materials (Material A and Material B)
The product requires 4 units of Material A costing $2
The product requires 2 units of Material B costing $1
The beginning materials inventory for Material A is 315,000
The beginning materials inventory for Material B is 157,500
Company policy is to have 15% of next quarters material needs in ending inventory
Desired Ending Inventory for the year in Material A is 450,000
Desired Ending Inventory for Material B is 240,000
The Direct Labor required for each product is .25 hours at an average rate of $9 per hour
Variable overhead rate is $4 per direct labor hour
Fixed Overhead is expected to be $50,000 per quarter