er9 Planning and Budgeting E9-2A. Budget Preparation Collins Company is preparin

Question

er9 Planning and Budgeting E9-2A. Budget Preparation Collins Company is preparing its master budget for April. Use th Estimates may be mates to determine the amounts necessary for each of the following requirementgiven est related to more than one requirement.) a. What should total sales revenue be if territories A and B estimate sales of 10,000 and 1n b. If the beginning finished goods inventory is an estimated 2,000 units and the desired c. What dollar amount of material should be purchased at S4 per pound if each unit of units, respectively, and the unit selling price is $40? ventory is 3,000 units, how many units should be produced? requires 3 pounds and beginning and ending materials inventories should be 5,000 pounds, respectively? How much direct la hourly rate of $13? How much manufacturing overhead should be incurred if fixed manufacturing overhead is $50,000 and variable manufacturing overhead is $2.50 per direct labor hour? direct labor cost should be incurred if each unit produced requires 1.5 hours at d. e.

Explanation / Answer

(a). Total sales revenue = $880000

Explanation;

Sales revenue for territory A;

(10000 units * $40) = $400000

Sales revenue for territory B;

(12000 units * $40) = $480000

Thus total sales revenue ($400000 + $480000) = $880000

(b). Units to be produced = 23000 units

Explanation;

Units to be produced will be calculated as follow;

(Ending inventory + Units to be sold – Beginning inventory)

Now, let’s put the values in above given formula;

(3000 units + 22000 units – 2000 units) = 23000 units

(c). Dollar amount of material = $272000

Explanation;

Number of units to be produced = 23000 units

Required material for 23000 units (23000 * 3) = 69000 pounds

Now let’s calculate material need to be purchase;

(69000 pounds + 4000 pounds – 5000 pounds) = 68000 pounds

Rate per pound is given = $4

So, Dollar amount of material (68000 * $4) = $272000

(d). Direct labor cost = $448500

Explanation;

Number of units to be produced = 23000 units

Direct labor hours required for each unit = 1.5 hours

Thus total direct labor hours required (23000 units * 1.5) = 34500 hours

Rate per hour = $13

So, direct labor cost (34500 * $13) = $448500

(e). Manufacturing overhead cost = $136250

Explanation;

Fixed manufacturing overhead = $50000

Variable manufacturing overhead (34500 * $2.50) = $86250

Thus, total manufacturing overhead cost ($50000 + $86250) = $136250

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