Exercise 9-39 Direct Labor Budget

Evans Company produces asphalt roofing materials. The production budget in bundles for
Evans’ most popular weight of asphalt shingle is shown for the following months:
Units
March 4,000
April 13,000
May 14,400
June 17,000

Each bundle produced requires (on average) 0.40 direct labor hours. The average cost of
direct labor is $20 per hour.

Required:
Prepare a direct labor budget for March, April, and May, showing the hours needed and the
direct labor cost for each month and in total.

March April May

Unit to be produced 4,000 13,000 14,400
Direct labor time per unit in hours 0.40 0.40 0.40
Total hours needed 1,600 5,200 5,760
Avarege wage per hour $20 $20 $20
Total direct labor cost $32,000 $104,000 $115,200

In total $251,200

Exercise 9-40 Sales Budget

Alger Inc. manufactures six models of leaf blowers and weed eaters. Alger’s budgeting team
is finalizing the sales budget for the coming year. Sales in units and dollars for last year
follow:
Product Number Sold Price ($) Revenue
LB-1 14,700 32 $ 470,400
LB-2 18,000 20 360,000
WE-6 25,200 15 378,000
WE-7 16,200 10 162,000
WE-8 6,900 18 124,200
WE-9 4,000 22 88,000
Total $ 1,582,600

In looking over the previous year’s sales figures, Alger’s sales budgeting team recalled the
following:
a. Model LB-1 is a newer version of the leaf blower with a gasoline engine. The LB-1 is
mounted on wheels instead of being carried. This model is designed for the commercial
market and did better than expected in its first year. As a result, the number of units of Model
LB-1 to be sold was forecast at 250% of the previous year’s units.
b. Models WE-8 and WE-9 were introduced on July 1 of last year. They are lighter versions
of the traditional weed eater and are designed for smaller households or condo units. Alger
estimates that demand for both models will continue at the previous year’s rate.
c. A competitor has announced plans to introduce an improved version of model WE-6,
Alger’s traditional weed eater. Alger believes that the model WE-6 price must be cut 30% to
maintain unit sales at the previous year’s level.
d. It was assumed that unit sales of all other models would increase by 5%, prices remaining
constant.

Required:
Prepare a sales budget by product and in total for Alger Inc. for the coming year.
LB-1 WE-7
= (units sold last year x forecast 250%) = (units sold last year + increase 5%)
= 14,700 units x 250% = 16,200 units x 105%
= 36,750 units = 17,010 units

LB-2 WE-8
= (units sold last year + increase 5%) = (units sold from July 1 of last year x 2)
= 18,000 units x 105% = 6,900 units x 2
= 18,900 units = 13,800 units

WE-6 WE-9
= (price - cut 30% of price) = (units sold from July 1 of last year x 2)
= $15 x 70% = 4,000 units x 2
= $10.5 = 8,000 units

Alger Inc.
Sales Budget
For the Coming Year
Product LB-1 LB-2 WE-6 WE-7 WE-8 WE9 Total

Units 36,750 18,900 25,200 17,010 13,800 8,000 119,660

Unit
selling $32 $20 $10.5 $10 $18 $22
price
Budgete $1,176,00 $378,00 $264,60 $170,10 $248,40 $176,00 $2,413,10
d sales 0 0 0 0 0 0 0