Chapter 6, Problem 6.37P

Revenue and production budgets. (CPA, adapted) The Chen Corporation manufactures and sells two products: Thingone and Thingtwo. In July 2016, Chen’s budget department gathered the following data to prepare budgets for 2017:

2017 Projected Sales

Product	Units	Price
Thingone	69,000	$160
Thingtwo	44,000	$258

2017 Inventories in Units

	Expected Target
Product	January 1, 2017	December 31, 2017
Thingone	24,000	29,000
Thingtwo	7,000	8,000

The following direct materials are used in the two products:

Projected data for 2017 for direct materials are:

Projected direct manufacturing labor requirements and rates for 2017 are:

Product	Hours per Unit	Rate per Hour
Thingone	4	$13
Thingtwo	5	18

Manufacturing overhead is allocated at the rate of $24 per direct manufacturing labor-hour.

Based on the preceding projections and budget requirements for Thingone and Thingtwo, prepare the following budgets for 2017:

1. 1. Revenues budget (in dollars)

Required

1. 2. What questions might the CEO ask the marketing manager when reviewing the revenues budget? Explain briefly.
2. 3. Production budget (in units)
3. 4. Direct material purchases budget (in quantities)
4. 5. Direct material purchases budget (in dollars)
5. 6. Direct manufacturing labor budget (in dollars)
6. 7. Budgeted finished-goods inventory at December 31, 2017 (in dollars)
7. 8. What questions might the CEO ask the production manager when reviewing the production, direct materials, and direct manufacturing labor budgets?
8. 9. How does preparing a budget help Chen Corporation’s top management better manage the company?