Developing a Master Budget for a Manufacturing Organization Jacobs Incorporated

Question

Developing a Master Budget for a Manufacturing Organization Jacobs Incorporated manufactures a product with a selling price of $50 per unit. Units and monthly cost data follow: Variakk Selling and administrative Direct materials Direct labor $5 per unit sold 10 per unit manufactured 10 per unit manufactured 5 per unit manufactured Variable manufacturing overhead 20,000 per month 30,000 per month Selling and administrative Manufacturing (including depreciation of $10,000) Jacobs pays all bills in the month incurred. All sales are on account with 50 percent collected the month of sale and the balance collected the following month. There are no sales discounts or bad debts. Jacobs desires to maintain an ending finished goods inventory equal to 20 percent of the following month's sales and a raw materials inventory equal to 10 percent of the following month's production. January 1, 2011, inventories are in line with these policies. Actual unit sales for December and budgeted unit sales for January, February, and March of 2011 are as follows:

Explanation / Answer

Expected production in January = 6000+(8000*20%)-(6000*20%)= 6400 3 Variable costs: Direct materials 64000 =6400*10 Direct labor 64000 =6400*10 Variable manufacturing overhead 32000 =6400*5 Total Variable costs 160000 Fixed manufacturing overhead 30000 Total manufacturing overhead 190000

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