Production, direct materials, and direct labor budgets Gerrad Manufacturing has projected sales of its product for the next six months as follows: January 240 units February 560 units March 800 units April 720 units May 320 units June 240 units The finished product requires 3 pounds of raw material and 10 hours of direct labor. Gerrad tries to maintain a Finished Goods ending inventory equal to the next two months of sales and a Raw Material ending inventory equal to one-half of the current mont production needs. January's beginning inventories are expected to conform to company policy. a. Prepare a production budget for February, March, and April. Note: Use a negative sign in your schedule to indicate that an amount is subtracted. February March April Sales El Total units needed BI Units produced b. Prepare a forecast of the units and cost of raw material that will be required for February, March, and April. The expected cost per pound of raw material is expected to be $2 February, $2.30 in March, and $2.40 in April.
Production, direct materials, and direct labor budgets Gerrad Manufacturing has projected sales of its product for the next six months as follows: January 240 units February 560 units March 800 units April 720 units May 320 units June 240 units The finished product requires 3 pounds of raw material and 10 hours of direct labor. Gerrad tries to maintain a Finished Goods ending inventory equal to the next two months of sales and a Raw Material ending inventory equal to one-half of the current mont production needs. January's beginning inventories are expected to conform to company policy. a. Prepare a production budget for February, March, and April. Note: Use a negative sign in your schedule to indicate that an amount is subtracted. February March April Sales El Total units needed BI Units produced b. Prepare a forecast of the units and cost of raw material that will be required for February, March, and April. The expected cost per pound of raw material is expected to be $2 February, $2.30 in March, and $2.40 in April.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Transcribed Image Text:Production, direct materials, and direct labor budgets
Gerrad Manufacturing has projected sales of its product for the next six months as follows:
January 240 units
February 560 units
March 800 units
April 720 units
May 320 units
June
240 units
The finished product requires 3 pounds of raw material and 10 hours of direct labor.
Gerrad tries to maintain a Finished Goods ending inventory equal to the next two months of sales and a Raw Material ending inventory equal to one-half of the current month's
production needs. January's beginning inventories are expected to conform to company policy.
a. Prepare a production budget for February, March, and April.
Note: Use a negative sign in your schedule to indicate that an amount is subtracted.
February
April
Sales
EI
Total units needed
BI
Units produced
March
b. Prepare a forecast of the units and cost of raw material that will be required for February, March, and April. The expected cost per pound of raw material is expected to be $2 in
February, $2.30 in March, and $2.40 in April.
Transcribed Image Text:production needs. January's beginning inventories are expected to conform to company policy.
a. Prepare a production budget for February, March, and April.
Note: Use a negative sign in your schedule to indicate that an amount is subtracted.
February
April
Sales
El
Total units needed
BI
Units produced
b. Prepare a forecast of the units and cost of raw material that will be required for February, March, and April. The expected cost per pound of raw material is expected to be $2 in
February, $2.30 in March, and $2.40 in April.
February March
Required raw material units
Cost of raw material purchases $
Units produced
DLHS per unit
Total hours
Cost per DLH
Cost of DL
March
$
$
c. Prepare a direct labor budget (assuming a $12 per hour rate) for February, March, and April.
February March
April
$
$
$
$
April
$
$
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