Production, direct materials, and direct labor budgets Gerrad Manufacturing has projected sales of its product for the next six months as follows: January 720 units February 1680 units March 2,400 units April 2160 units May 960 units June 720 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 March April Sales Answer Answer Answer EI Answer Answer Answer Total units needed Answer Answer Answer BI Answer Answer Answer Units produced Answer Answer Answer 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 April Required raw material units Answer Answer Answer Cost of raw material purchases Answer Answer Answer c. Prepare a direct labor budget (assuming a $12 per hour rate) for February, March, and April. February March April Units produced Answer Answer Answer DLHs per unit Answer Answer Answer Total hours Answer Answer Answer Cost per DLH Answer Answer Answer Cost of DL Answer Answer Answer
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.
Production, direct materials, and direct labor budgets
Gerrad Manufacturing has projected sales of its product for the next six months as follows:
| January | 720 | units |
| February | 1680 | units |
| March | 2,400 | units |
| April | 2160 | units |
| May | 960 | units |
| June | 720 | 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 | March | April | |
|---|---|---|---|
| Sales | Answer | Answer | Answer |
| EI | Answer | Answer | Answer |
| Total units needed | Answer | Answer | Answer |
| BI | Answer | Answer | Answer |
| Units produced | Answer | Answer | Answer |
b. Prepare a
| February | March | April | |
|---|---|---|---|
| Required raw material units | Answer | Answer | Answer |
| Cost of raw material purchases | Answer | Answer | Answer |
c. Prepare a direct labor budget (assuming a $12 per hour rate) for February, March, and April.
| February | March | April | |
|---|---|---|---|
| Units produced | Answer | Answer | Answer |
| DLHs per unit | Answer | Answer | Answer |
| Total hours | Answer | Answer | Answer |
| Cost per DLH | Answer | Answer | Answer |
| Cost of DL | Answer | Answer | Answer |
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