Budget Preparation Collins Company is preparing its master budget for April. Use
ID: 2575645 • Letter: B
Question
Budget Preparation Collins Company is preparing its master budget for April. Use the given estimates 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 10,000 and 12,000 units, respectively, and the unit selling price is $40? $Answer b. If the beginning finished goods inventory is an estimated 2,000 units and the desired ending inventory is 3,000 units, how many units should be produced? Answer c. What dollar amount of material should be purchased at $4 per pound if each unit of product requires 3 pounds and beginning and ending materials inventories should be 5,000 and 4,000 pounds, respectively? $Answer d. How much direct labor cost should be incurred if each unit produced requires 1.5 hours at an hourly rate of $13? $Answer e. 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?
Explanation / Answer
Answer a.
Number of units sold = 10,000 + 12,000
Number of units sold = 22,000
Unit Selling Price = $40
Total Sales Revenue = Number of units sold * Unit Selling Price
Total Sales Revenue = 22,000 * $40
Total Sales Revenue = $880,000
Answer b.
Beginning Finished Goods Inventory = 2,000
Desired Ending Inventory = 3,000
Number of units produced = Desired Ending Inventory + Number of units sold - Beginning Finished Goods Inventory
Number of units produced = 3,000 + 22,000 - 2,000
Number of units produced = 23,000
Answer c.
Number of pounds required per unit = 3
Number of units produced = 23,000
Number of pounds required to meet production = 23,000 * 3
Number of pounds required to meet production = 69,000
Number of pounds of raw materials purchased = Number of pounds required to meet production + Ending Raw materials inventory - Beginning raw materials inventory
Number of pounds of raw materials purchased = 69,000 + 4,000 - 5,000
Number of pounds of raw materials purchased = 68,000
Cost of materials purchased = 68,000 * $4
Cost of materials purchased = $272,000
Answer d.
Direct labor hours per unit = 1.5
Number of units produced = 23,000
Total Direct labor hours = 23,000 * 1.5
Total Direct labor hours = 34,500
Cost of Direct Labor = 34,500 * $13
Cost of Direct Labor = $448,500
Answer e.
Variable Manufacturing Overhead = $2.50 * 34,500
Variable Manufacturing Overhead = $86,250
Total Manufacturing Overhead = Variable Manufacturing Overhead + Fixed Manufacturing Overhead
Total Manufacturing Overhead = $86,250 + $50,000
Total Manufacturing Overhead = $136,250
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