Bakersfield Company makes and sells glare filters for microcomputer monitors. St
ID: 2403159 • Letter: B
Question
Bakersfield Company makes and sells glare filters for microcomputer monitors. Steve Smith, the controller, is responsible for preparing Bakersfield’s master budget and assembled the following data for the upcoming year. The direct materials cost per unit was $18 in December of the current year. Labor saving machinery will be operational by March of the upcoming year. Also, as of March 1, the company plans to increase its direct labor rate. Direct labor for Bakersfield is considered variable because the company can call in its workers when needed and send them home when not needed. Bakersfield expects to have 5,600 filters in inventory on December 31 of the current year, and has a policy of carrying 35 percent of the following month’s projected sales in inventory. Information for the first four months of the upcoming year is as follows:
January
February
March
April
Estimated unit sales
36,000
34,500
39,000
38,600
Sales price per unit
$160
$160
$150
$150
Direct labor hours per unit
3.0
3.0
2.5
2.5
Direct labor rate per hour
$36
$36
$40
$40
Direct materials cost per unit
$18
$18
$18
$18
Requirements:
Prepare the following budgets for Bakersfield Company for each month in the first quarter (January through March) and for the entire first quarter of the upcoming year. Show supporting calculations.
Production budget
Direct labor cost budget
Direct materials usage budget in dollars
Sales revenue budget
Calculate the total budgeted contribution margin for Bakersfield by month (months of January through March) and in total for the first quarter of the upcoming year. Show supporting computations.
January
February
March
April
Estimated unit sales
36,000
34,500
39,000
38,600
Sales price per unit
$160
$160
$150
$150
Direct labor hours per unit
3.0
3.0
2.5
2.5
Direct labor rate per hour
$36
$36
$40
$40
Direct materials cost per unit
$18
$18
$18
$18
Explanation / Answer
Production Budget :-
January
February
March
Quarter
Estimated unit sales
36,000
34,500
39,000
109500
Add:-Ending Inventory
(34500 * 35%)
=12075
(39000 * 35%)
=13650
(38600 * 35%)
=13510
Less:- Beginning Inventory
5600
12075
13650
Units to be Produced
42475
36075
38860
117410
Direct Labour Cost Budget :-
January
February
March
Quarter
Units to be Produced
42475
36075
38860
117410
Direct labor hours per unit
3.0
3.0
2.5
Total hours required (A)
127425
108225
97150
332800
Direct labor rate per hour ($) (B)
36
36
40
Direct Labour Cost Budget (A * B)
4587300
3896100
3886000
12369400
Direct materials usage budget in dollars:-
January
February
March
Quarter
Units to be Produced
42475
36075
38860
117410
Raw Material required
42475
36075
38860
117410
Cost pu
18
18
18
18
Direct materials usage budget in dollars
764550
649350
699480
2113380
Sales revenue budget :-
January
February
March
Quarter
Estimated unit sales
36,000
34,500
39,000
109500
Sales price per unit
$160
$160
$150
Sales revenue budget
5760000
5520000
5850000
17130000
Contribution Budget :-
January
February
March
Quarter
Sales revenue budget
5760000
5520000
5850000
17130000
(-) Direct Material
(36000 * 18)
=648000
(34500 * 18)
=621000
(39000 * 18)
=702000
1971000
(-) Direct Labour
(36 * 3 * 36000)
=3888000
(36 * 3 * 34500)
=3726000
(40 * 2.5 * 39000)
=3900000
11514000
Contribution Margin
1224000
1173000
1248000
3645000
January
February
March
Quarter
Estimated unit sales
36,000
34,500
39,000
109500
Add:-Ending Inventory
(34500 * 35%)
=12075
(39000 * 35%)
=13650
(38600 * 35%)
=13510
Less:- Beginning Inventory
5600
12075
13650
Units to be Produced
42475
36075
38860
117410
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