Sales, production, direct materials purchases, and direct labor cost budgets The budget director of Royal Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for February is summarized as follows: a. Estimated sales of King and Prince chairs for February by sales territory: Northern Domestic: King 610 units at $780 per unit Prince 750 units at $550 per unit Southern Domestic: King 340 units at $780 per unit Prince 440 units at $550 per unit International: #160; King 360 units at $850 per unit Prince 290 units at $600 per unit b. Estimated inventories at February 1: Direct materials: Fabric 420 sq. yds. Wood 580 linear ft. Filler 250 cu. ft. Springs 660 units Finished products: King 90 units Prince 25 units c. Desired inventories at February 28: Direct materials: Fabric 390 sq. yds. Wood 650 linear ft. Filler 300 cu. ft. Springs 540 units Finished products: King 80 units Prince 35 units d. Direct materials used in production: In manufacture of King: Fabric 6.0 sq. yds. per unit of product Wood 38 linear ft. per unit of product Filler 4.2 cu. ft. per unit of product Springs 16 units per unit of product In manufacture of Prince: Fabric 4.0 sq. yds. per unit of product Wood 26 linear ft. per unit of product Filler 3.4 cu. ft. per unit of product Springs 12 units per unit of product e. Anticipated purchase price for direct materials: Fabric $12.00 per sq. yd. Wood 7.00 per linear ft. Filler $3.00 per cu. ft. Springs 4.50 per unit f. Direct labor requirements: King: Framing Department 1.2 hrs. at $12 per hr. Cutting Department 0.5 hr. at $14 per hr. Upholstery Department 0.8 hr. at $15 per hr. Prince: Framing Department 1.0 hr. at $12 per hr. Cutting Department 0.4 hr. at $14 per hr. Upholstery Department 0.6 hr. at $15 per hr.
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.
Sales, production, direct materials purchases, and direct labor cost budgets
The budget director of Royal Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for February is summarized as follows:
a. Estimated sales of King and Prince chairs for February by sales territory:
Northern Domestic:
King 610 units at $780 per unit
Prince 750 units at $550 per unit
Southern Domestic:
King 340 units at $780 per unit
Prince 440 units at $550 per unit
International:
#160; King 360 units at $850 per unit
Prince 290 units at $600 per unit
b. Estimated inventories at February 1:
Direct materials:
Fabric 420 sq. yds.
Wood 580 linear ft.
Filler 250 cu. ft.
Springs 660 units
Finished products:
King 90 units
Prince 25 units
c. Desired inventories at February 28:
Direct materials:
Fabric 390 sq. yds.
Wood 650 linear ft.
Filler 300 cu. ft.
Springs 540 units
Finished products:
King 80 units
Prince 35 units
d. Direct materials used in production:
In manufacture of King:
Fabric 6.0 sq. yds. per unit of product
Wood 38 linear ft. per unit of product
Filler 4.2 cu. ft. per unit of product
Springs 16 units per unit of product
In manufacture of Prince:
Fabric 4.0 sq. yds. per unit of product
Wood 26 linear ft. per unit of product
Filler 3.4 cu. ft. per unit of product
Springs 12 units per unit of product
e. Anticipated purchase price for direct materials:
Fabric $12.00 per sq. yd.
Wood 7.00 per linear ft.
Filler $3.00 per cu. ft.
Springs 4.50 per unit
f. Direct labor requirements:
King:
Framing Department 1.2 hrs. at $12 per hr.
Cutting Department 0.5 hr. at $14 per hr.
Upholstery Department 0.8 hr. at $15 per hr.
Prince:
Framing Department 1.0 hr. at $12 per hr.
Cutting Department 0.4 hr. at $14 per hr.
Upholstery Department 0.6 hr. at $15 per hr.
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