Brenau & Company makes and sells glare filters for microcomputer monitors. Jack

Question

Brenau & Company makes and sells glare filters for microcomputer monitors. Jack Heron, controller, is responsible for preparing Brenau’s master budget and has assembled the data below for next year. The direct labor rate includes wages and all employee-related benefits and payroll taxes. Labor-saving machinery will be fully operational by March. Also, as of March 1, the company’s union contract calls for an increase in direct labor wages that is included in the direct labor rate. Brenau expects to have 10,000 glare filters in beginning inventory and has a policy of carrying 50 percent of the following month’s projected sales in inventory. Budgeted sales and cost data are as follows. Jan Feb March April Estimated unit sales 20,000 24,000 16,000 18,000 Sales price per unit $80 $80 $75 $75 Direct labor hours per unit 4.0 4.0 3.5 3.5 Direct labor hourly rate $15 $15 $16 $16 Direct materials cost per unit $10 $10 $10 $10 1. Prepare the following budgets for the first quarter. Be sure to show supporting calculations: (1) production budget in units, (2) schedule of direct labor hours required, (3) schedule of the cost of direct materials used, and (4) revenue budget. 2. Calculate the total budgeted contribution margin for the first quarter. Be sure to show supporting calculations. 3. Describe at least three behavioral considerations in the profit-planning and budgeting process.

Explanation / Answer

Answer: to the 1st 4 parts:

1)

2)

3)

4)

Production budget in units: Jan Feb March April A Estimated sales 20000 24000 16000 18000 B Estimated Closing Stock 12000 8000 9000 C Estimated Opening Stock 10000 12000 8000 D =A+B-C Budgeted production units 22000 20000 17000

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