E9-2B. Budget Preparation Reeves Company is preparing its master budget for July
ID: 2552467 • Letter: E
Question
E9-2B. Budget Preparation Reeves Company is preparing its master budget for July. Use the given esti- LO mates 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 A and B estimate sales of 8,000 and 20,000 units respectively, and the unit selling price is $50? If the beginning finished goods inventory is an estimated 1,500 units and the desired ending in- ventory is 2.500 units, how many units should be produced? b.Explanation / Answer
a.
Total sales revenue = Territory A + Territoay B
= (8,000 * 50) + (20,000 * 50)
= 1,400,000
b.
Units to be produced = Sales in units + Ending inventory - Beginning inventory
Territory A = 8,000 + 2,500 - 1,500 = 9,000
Territory B = 20,000 + 2,500 - 1,500 = 21,000
c.
Raw material to be purchased = [(Units to be produced * raw material required per unit) + Ending inventory - Beginning inventory] * cost per unit
Territory A = [(9,000 * 2) + 3,000 - 4,000] * 3 = 51,000
Territory B = [(21,000 * 2) + 3,000 - 4,000] * 3 = 123,000
d.
Direct labour cost = units to be produced * labour hours per unit * rate per hour
Territory A = 9,000 * 1.5 * 14 = 189,000
Territory B = 21,000 * 1.5 * 14 = 441,000
e.
Manufacturing overhead = Fixed manufacturing overhead + Variable manufacturing overhead
Territory A = 60,000 + (9,000*1.5*1.5) = 80,250
Territory B = 60,000 + (21,000*1.5*1.5) = 107,250
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