The East Division of Kensic Company manufactures a vital component that is used

Question

The East Division of Kensic Company manufactures a vital component that is used in one of Kensic's major product lines. The East Division has been experiencing some difficuity in coordinating activities between its various departments, which has resulted in some shortages of the component at critical times. To overcome the shortages, the manager of East Division has decided to initiate a monthly budgeting system that is integrated between departments The first budget is to be for the second quarter of the current year (April, May and June). To assist in developing the budget figures, the divisional controller has accumulated the following information. Sales: Sales through the first three months of the current year were 30,000 units. Actual sales in units for January, February, and March, and planned sales in units over the next five months, are given below: January (actual) February (actual) March (actual) April (planned) May (planned) June (planned) July (planned) August (planned) 6,000 10,000 14,000 20,000 34,000 51,000 45,000 30,000 In total, the East Division expects to produce and sell 250,000 units during the current year. Direct Material: Two different materials are used in production of the component. Data regarding these materials are given below: Units of Direct Materials per Cost per Inventory at Direct March 31 Material Finished Component lb/ft No. 208 No. 311 4 pounds 9 feet $5.00 2.00 46,000 pounds 69,000 feet

Explanation / Answer

Part 1 - Production Budget

Part 2 - Raw Material Purchase Budget

Raw Material 208

74800

(37400*2)

99600

(49800*2)

84000

[(45000) + (30000*20%) - (9000)]*2

Raw Material 311

112200

(37400*3)

149400

(49800*3)

126000

[(45000)+(30000*20%) - (9000)]*3

Total Raw Material Purchases

Part 3 - Schedule of Cash Disbursements

Part 4 - Direct Labour Budget

Particulars April May June Total Planned Sales 20000 34000 51000 105000 + Ending Inventory (20% of next month sale) 6800 10200 9000 26000 Units Available 26800 44200 60000 131000 - Beginning Inventory 4000 6800 10200 21000 Units to be Produced 22800 37400 49800 110000

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