Problem 4.

36: Operating Budget, Comprehensive Analysis

1. Sales Budget
January February March Total April
Units 10,000 10,500 13,000 33,500 16,000
Selling Price 110 110 110 110 110
Sales 1100000 1,155,000 1430000 3685000 1760000

2. Production Budget
January February March Total
Unit sales 10000 10500 13000 33500
Desired Ending Inventory 2100 2600 3200 3200
Total needed 12100 13100 16200 36700
Less: Beginning Inventory -900 -2100 -2600 -900
Units Produced 11200 11000 13600 35800

3. Direct Materials Purchase budget

January February March
Part #K298 Part #C30 Part #K298 Part #C30 Part #K298 Part #C30
Units Produced 11200 11200 11000 11000 13600 13600
Dir.mat. Per unit 2 3 2 3 2 3
Production Needs 22400 33600 22000 33000 27200 40800
Desired Ending Inv. 6600 9900 8160 12240 9900 14850
Total Needed 29000 43500 30160 45240 37100 55650
Less: Beg. Inventory -6720 -10080 -6600 -9900 -8160 -12240
Direct Materials to purchase 22280 33420 23560 35340 28940 43410
Cost per unit 4 7 4 7 4 7
Total Purchase cost 89120 233940 94240 247380 115760 303870

4. Direct Labor budget

January February March Total
Units to be produced 11200 11000 13600 35800
Direct labor time per unit(hrs) 1.5 1.5 1.5 1.5
Total hours needed 16800 16500 20400 53700
Wages per hour 20 20 20 20
Total direct labor cost 336000 330000 408000 1074000

5. Overhead Budget
January February March Total
Budgeted direct labor hrs. 16800 16500
Variable Overhead Rate 3.9 3.9 3.9 3.9
Budgeted variable overhead 65520
Budgeted fixed overhead 161800 161800 161800 485400
Total overhead cost 227320

6. Selling and administrative expense budget

January February March Total
Planned sales 10000 10500 13000 33500
Variable selling&admin. Exp per unit 6.6 6.6 6.6 6.6
Total variable expense 66000 69300 85800 221100
Fixed selling &admin. Expense:
Salaries 88500 88500 88500 265500
Depreciation 25000 25000 25000 75000
Other 137000 137000 137000 411000
Total fixed expenses 250500 250500 250500 751500
Total selling & administrative exp. 316500 319800 336300 972600

7. Ending finished goods inventory budget

Unit cost consumption:
Direct materials:
Part K298 8
Part C30 21
Direct Labor 30
Overhead:
Variable 5.85
Fixed
Total unit cost
Number of units
Finished Goods
 18500
110
2035000

Total
Part #K298 Part #C30
35800 35800
2 3
71600 107400
9900 14850
81500 122250
-6720 -10080
74780 112170
4 7
299120 785190