OPERATING BUDGETS Annette Company produces a caliber used in the production of a

Question

OPERATING BUDGETS

Annette Company produces a caliber used in the production of automobile transmissions. The caliber is sold to automobile manufactures and automobile engine manufacturers.   The Sales Price is $240 per unit. The Budgeted (Expected) Sales In Units for the first four (4) months of the next year are as follow:

                                                MONTH                               UNITS

                                                JANUARY                             30,000

                                                FEBRUARY                          40,000

                                                MARCH                                50,000

                                                APRIL                                   60,000

Annette Company's policy is to have twenty percent (20%) of next month's Budgeted (Expected) Sales in Ending Finished Goods Inventory. In addition, each caliber requires four (4) pounds of metal materials (Direct Materials) which cost $12.50 per pound. Annette Company's policy is to have forty percent (40%) of next month's production needs in Ending Raw Materials (Direct Materials) Inventory.

Required

Prepare a monthly Operating Budget for the first quarter of next year for the following individual Budgets:

1.     Sales Budget

2.     Production Budget

3.     Direct Materials Purchases Budget

INSERT THE REQUIRED A BOVE INFORMATION INT BELOW Annette Company Sales Budget (Schedule 1) For the Quarter Ended March 31 Janua Februa March Total Units × Sales Price Total Sales Annette Company Production Budget (Schedule 2) For the Quarter Ended March 31 Januar Februa March Total Sales (Schedule 1) Desired Ending Finished Inventory Total Units Needed Less: Beginning Finished Goods Inventory Units To Be Produced

Explanation / Answer

1. Sales budget

Production budget

8000

(40000×20%)

10,000

(50000×20%)

12,000

(60000×20%)

30,000

6000

(30000×20%)

8000

10,000

24,000

3. Direct material purchase budget

67,200

(168000×40%)

83,200

(208000×40%)

$99,200

(62000×4×40%)

249,600

51,200

(128,000×40%)

67,200

83,200

201,600

January February March Total Units 30,000 40,000 50,000 120,000 × sales price ×$240 ×$240 ×$240 ×$240 Total sales $7,200,000 $9,600,000 $12,000,000 $28,800,000

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