Budget Preparation Westport Company is preparing its master budget for May. Use

Question

Budget Preparation Westport Company is preparing its master budget for May. Use the estimates

provided to determine the amounts necessary for each of the following requirements. (Estimates may

be related to more than one requirement.)

a. What should total sales revenue be if territories E and W estimate sales of 50,000 and 100,000

units, respectively, and the unit selling price is $27?

b. If the beginning finished goods inventory is an estimated 7,000 units and the desired ending in-

ventory is 6,000 units, how many units should be produced?

c. What dollar amount of material should be purchased at $2 per pound if each unit of product re-

quires 2.5 pounds and beginning and ending materials inventories should be 13,500 and 12,000

pounds, respectively?

d. How much direct labor cost should be incurred if each unit produced requires 0.5 hours at an

hourly rate of $11?

e. How much manufacturing overhead should be incurred if fixed manufacturing overhead is

$45,000 and variable manufacturing overhead is $1.30 per direct labor hour?

Explanation / Answer

a) E W total Expected sale units 50,000 100,000 150,000 unit selling price 2 2 2 Total sales revenue 100000 200000 300000 total sales revenue = $300,000 b) Estimated sale units 150,000 Add Ending inventory 6,000 total needs 156,000 less beginning inventory -7,000 production required 149,000 units to be produced 149000 units c) production required 149000 pounds per unit required 2.5 total pounds required 372500 Add:closing inventory 12,000 total needs 384500 less :Beginning inventory -13,500 materials required 371000 cost per pound 2 total cost of materials 742000 cost of materials $742,000 d) production required 149,000 hours required per unit 0.5 Total hours required 74500 Rate per hour 11 total direct labor cost 819500 total direct labor cost 819,500 e) total hours required 74,500 cost per direct labor 1.3 total variable manufacturing overhead 96850 Add:Fixed manufacturing overhead 45,000 total manufacturing overhead 141850 total manufacturing overhead 141,850

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