Sales, Production, Direct Materials Purchases, and Direct Labor Cost Budgets The

Question

Sales, Production, Direct Materials Purchases, and Direct Labor Cost Budgets

The budget director of Royal Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for February 2016 is summarized as follows:

a. Estimated sales of King and Prince chairs for February by sales territory:

b. Estimated inventories at February 1:

c. Desired inventories at February 28:

d. Direct materials used in production:

e. Anticipated purchase price for direct materials:

f. Direct labor requirements:

Required:

1. Prepare a sales budget for February.

2. Prepare a production budget for February.

3. Prepare a direct materials purchases budget for February.

4. Prepare a direct labor cost budget for February.

Northern Domestic: King 610 units at $780 per unit Prince 750 units at $550 per unit Southern Domestic: King 340 units at $780 per unit Prince 440 units at $550 per unit International: King 360 units at $850 per unit Prince 290 units at $600 per unit

Explanation / Answer

Royal Furniture Company Sales Budget For the Month Ending February 28, 2016 Product and Area Unit Sales Unit Selling Total Sales Volume Price King: Northern Domestic 610 780 475800 Southern Domestic 340 780 265200 International 360 850 306000 Total 1310 1047000 Prince: Northern Domestic 750 550 412500 Southern Domestic 440 550 242000 International 290 600 174000 Total 1480 828500 Total revenue from sales 1875500 Royal Furniture Company Production Budget For the Month Ending February 28, 2016 Units King Prince Expected units to be sold 1310 1480 Plus desired inventory, February 28, 2016 80 35 Total 1390 1515 Less estimated inventory, February 1, 2016 90 25 Total units to be produced 1300 1490 Royal Furniture Company Direct Materials Purchases Budget For the Month Ending February 28, 2016 Direct Materials Fabric Wood Filler Springs Total (sq. yds.) (linear ft.) (cu. ft.) (units) Required units for production: King (1310) 6 7860 38 49780 4.2 5502 16 20960 Prince (1480) 4 5920 26 38480 3.4 5032 12 17760 Plus desired inventory, February 28, 2016 390 650 300 540 Total 14170 88910 10834 39260 Less estimated inventory, February 1, 2016 420 580 250 660 Total units to be purchased 13750 88330 10584 38600 Unit price $12 $7 $3 $4.50 Total direct materials to be purchased $165,000 $618,310 $31,752 $173,700 $988,762 For the Month Ending February 28, 2016 Framing Cutting Upholstery Total Department Hrs Department Department Hours required for production: 1310 King 1.2 1572 0.5 655 0.8 1048 1480 Prince 1 1480 0.8 1184 0.6 888 Total 3052 1839 1936 Hourly rate 12 14 15 Total direct labor cost 36624 25746 29040 91410

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