
Concept explainers
Sales, production, direct materials purchases, and direct labor cost budgets
The budget director of Gourmet Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for July is summarized as follows:
- A. Estimated sales for July by sales territory:
Maine: | |
Backyard Chef............................. | 310 units at $700 per unit |
Master Chef............................... | 150 units at $ 1,200 per unit |
Vermont: | |
Backyard Chef............................. | 240 units at $750 per unit |
Master Chef............................... | 110 units at $1,300 per unit |
New Hampshire: | |
Backyard Chef............................. | 360 units at $750 per unit |
Master Chef............................... | 180 units at $1,400 per unit |
- B. Estimated inventories at July 1:
Direct materials: | Finished products: | ||
Grates..................... | 290 units | Backyard Chef........ | 30 units |
Stainless steel.............. | 1,500 lbs. | Master Chef........... | 42 units |
Burner subassemblies...... | 170 units | ||
Shelves.................... | 340 units |
- C. Desired inventories at July 31:
Direct materials: | Finished products: | ||
Grates......................... | 340 units | Backyard Chef........ | 40 units |
Stainless steel.................. | 1,800 lbs. | Master Chef........... | 20 units |
Burner subassemblies.......... | 155 units | ||
Shelves........................ | 315 units |
- D. Desired materials used in production
In manufacture of Backyard Chef: | |
Grates........................................ | 3 units per unit of product |
Stainless steel................................. | 24 lbs. per unit of product |
Burner subassemblies......................... | 2 units per unit of product |
Shelves....................................... | 4 units per unit of product |
In manufacture of Master Chef: | |
Grates........................................ | 6 units per unit of product |
Stainless steel................................. | 42 lbs. per unit of product |
Burner subassemblies......................... | 4 units per unit of product |
Shelves....................................... | 5 units per unit of product |
- E. Anticipated purchase price for direct materials:
Grates................. | $15 per unit |
Stainless steel.......... | $6 per lb. |
Burner subassemblies...... | $110 per unit |
Shelves.................... | $10 per unit |
- F. Desired labor requirements:
Backyard Chef: | |
Stamping Department...................... | 0.50 hr. at $ 17 per hr. |
Forming Department....................... | 0.60 hr. at $15 per hr. |
Assembly Department...................... | 1.00 hr. at $14 per hr. |
Master Chef: | |
Stamping Department...................... | 0.60 hr. at $17 per hr. |
Forming Department....................... | 0.80 hr. at $15 pr hr. |
Assembly Department...................... | 1.50 hrs. at $14 per hr. |
Instructions
- 1. Prepare a sales budget for July.
- 2. Prepare a production budget for July.
- 3. Prepare a direct materials purchases budget for July.
- 4. Prepare a direct labor cost budget for July.
1.

Budgeting is a process to prepare the financial statement by the manager to estimate the organization’s future actions. It is also helpful to satisfy the everyday activities.
To Prepare: The sales budget for the month ending July 31.
Explanation of Solution
The following table shows the sales budget.
Company G Sales Budget For the Month Ending July 31 | |||
Product and Area | Unit Sales Volume | Unit Selling Price ($) | Total Sales ($) |
(A) | (B) | (A) × (B) | |
Backyard Chef: | |||
M | 310 | 700 | 217,000 |
V | 240 | 750 | 180,000 |
N | 360 | 750 | 270,000 |
Total | 1,070 | 667,000 | |
Master Chef: | |||
M | 150 | 1,200 | 180,000 |
V | 110 | 1,300 | 143,000 |
N | 180 | 1,400 | 252,000 |
Total | 440 | 575,000 | |
Total Revenue from Sales | 1,242,000 |
Table (1)
2.

To Prepare: The production budget for the month ending July 31.
Explanation of Solution
The following table shows the production budget.
Company G Production Budget For the Month Ending July 31 | ||
Details | Units | |
Backyard Chef | Master Chef | |
Expected Units to be Sold | 910 | 440 |
Add: Desired Inventory, July 31 | 40 | 22 |
Total Units Required | 950 | 462 |
Less: Estimated Inventory, July 1 | (30) | (32) |
Total Units to be Produced | 920 | 430 |
Table (2)
3.

To Prepare: The direct materials purchase budget for the month ending July 31.
Answer to Problem 21.2APR
The following table shows the direct materials purchase budget.
Company G Direct Materials Purchase Budget For the Month Ending July 31 | ||||
Details | Units | |||
Grates | Stainless Steel | Burner | Shelves | |
Required units for production: | ||||
Backyard Chef | 2,760 (1) | 22,080 (2) | 1,840 (3) | 3,680 (4) |
Master Chef | 2,580 (5) | 18,060 (6) | 1,720 (7) | 2,150 (8) |
Add: Desired inventory, July 31 | 340 | 1,800 | 155 | 315 |
Total units required | 5,680 | 41,940 | 3,715 | 6,145 |
Less: Estimated inventory, July 1 | (290) | (1,500) | (170) | (340) |
Total units to be purchased (A) | 5,390 | 40,440 | 3,545 | 5,805 |
Unit price (B) | $15 | $6 | $110 | $10 |
Total (A) × (B) | $80,850 | $242,640 | $389,950 | $58,050 |
Total direct materials to be purchased | 771,490 |
Table (3)
Explanation of Solution
Working Notes:
Calculate the direct material (grates) for backyard chef.
Calculate the direct material (stainless steel) for backyard chef.
Calculate the direct material (burner) for backyard chef.
Calculate the direct material (shelves) for backyard chef.
Calculate the direct material (grates) for master chef.
Calculate the direct material (stainless steel) for master chef.
Calculate the direct material (burner) for master chef.
Calculate the direct material (shelves) for master chef.
4.

To Prepare: The direct labor cost budget of Company G.
Answer to Problem 21.2APR
The following table shows the direct labor cost budget for stamping, forming, and assembly department.
Company G | |||
Direct Labor Cost Budget | |||
For the Month Ending July 31 | |||
Particulars | Stamping Department | Forming Department |
Assembly Department |
Hours Required for Production: | |||
Backyard Chef | 460 (9) | 552 (10) | 920 (11) |
Master Chef | 258 (12) | 344 (13) | 645 (14) |
Total Hours Required (A) | 718 | 896 | 1,565 |
Hourly Rate (B) | $17 | $15 | $14 |
Total Cost (A) × (B) | $12,206 | $13,440 | $21,910 |
Total Direct Labor Cost | $47,556 |
Table (4)
Explanation of Solution
Working Notes:
Calculate the hours required for the production of backyard chef in stamping department.
Calculate the hours required for the production of backyard chef in forming department.
Calculate the hours required for the production of backyard chef in assembly department.
Calculate the hours required for the production of master chef in stamping department.
Calculate the hours required for the production of master chef in forming department.
Calculate the hours required for the production of master chef in assembly department.
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