
Concept explainers
1.
Prepare the sales budget for the year ended December 31, 2016.
1.

Explanation of Solution
Prepare the sales budget for the year ended December 31, 2016.
SS Incorporation | |||
Sales budget | |||
For the year ended December 31, 2016 | |||
Product | Sales volume (Unit) | Selling price (Unit) | Total sales |
Tables | 30,000 | $175 | $5,250,000 |
Chairs | 120,000 | $75 | $9,000,000 |
Total | 150,000 | $14,250,000 |
Table (1)
2.
Prepare the production budget for the year ended December 31, 2016.
2.

Explanation of Solution
Prepare the production budget for the year ended December 31, 2016.
SS Incorporation | ||
Production budget | ||
For the year ended December 31, 2016 | ||
Particulars | Units | |
Tables | Chairs | |
Sales (From sales budget) | 30,000 | 120,000 |
Add: desired ending inventory, December 31 | 1,500 | 6,000 |
Total | 31,500 | 126,000 |
Less: Estimated beginning inventory, January 1 | 1,000 | 4,000 |
Total production | 30,500 | 122,000 |
Table (2)
3.
Prepare the direct material budget for the year ended December 31, 2016.
3.

Explanation of Solution
Prepare the direct material budget for the year ended December 31, 2016.
SS Incorporation | |||
Direct materials budget | |||
For the year ended December 31, 2016 | |||
Particulars | Direct materials | Total | |
Rattan (Yd.) | Binding cane (Yd.) | ||
Quantities required for production: | |||
Tables: | |||
| 305,000 | ||
| 183,000 | ||
Chairs | |||
| 732,000 | ||
| 366,000 | ||
Add: Desired ending inventory, December 31 | 51,000 | 25,500 | |
Total | 1,088,000 | 574,500 | |
Less: Estimated beginning inventory, January 1 | 34,000 | 17,000 | |
Total quantity to be purchased (A) | 1,054,000 | 557,500 | |
Unit price (B) | $5 | $3 | |
Total direct materials purchases | $5,270,000 | $1,672,500 | $6,942,500 |
Table (3)
4.
Prepare the direct labor budget for the year ended December 31, 2016.
4.

Explanation of Solution
Prepare the direct labor budget for the year ended December 31, 2016.
SS Incorporation | |||
Direct labor budget | |||
For the year ended December 31, 2016 | |||
Particulars | Department | Total | |
Molding | Finishing | ||
Hours required for production: | |||
Tables: | |||
| 15,250 | ||
| 7,625 | ||
Truck tires: | |||
| 30,500 | ||
| 12,200 | ||
Total (A) | 45,750 | 19,825 | |
Hourly rate (B) | $15 | $13 | |
Total direct labor cost | $688,250 | $257,725 | $943,975 |
Table (4)
5.
Prepare the factory
5.

Explanation of Solution
Prepare the factory overhead budget for the year ended December 31, 2016.
SS Incorporation | ||
Factory overhead budget | ||
For the year ended December 31, 2016 | ||
Particulars | Amount ($) | Amount ($) |
Indirect materials | 98,500 | |
Indirect labor | 132,200 | |
57,500 | ||
Power and light | 92,200 | |
Total | $380,400 |
Table (5)
6.
Prepare the cost of goods sold budget for the year ended December 31, 2016.
6.

Explanation of Solution
Prepare the cost of goods sold budget for the year ended December 31, 2016.
SS Incorporation | ||
Cost of goods sold budget | ||
For the year ended December 31, 2016 | ||
Particulars | Amount ($) | Amount ($) |
Finished goods inventory, January 1 | 240,000 | |
Direct materials inventory, January 1 (1) | 221,000 | |
Direct materials purchases | 6,942,500 | |
Total direct materials available | 7,163,500 | |
Less: Direct materials inventory, December 31 (2) | 331,500 | |
Cost of direct materials used | 6,832,000 | |
Direct labor | 943,975 | |
Factory overhead | 380,400 | |
Cost of goods manufactured | 8,156,375 | |
Cost of goods available for sale | 8396,375 | |
Less: Finished goods inventory, December 31 | 360,000 | |
Cost of goods sold | 8,036,375 |
Table (6)
Working note (1):
Calculate the amount of direct materials inventory as on January 1:
Particulars | Calculation | Amount ($) |
Rattan | 170,000 | |
Binding care | 51,000 | |
Total | 171,000 |
Table (7)
Working note (2):
Calculate the amount of direct materials inventory as on December 31:
Particulars | Calculation | Amount ($) |
Rattan | 120,000 | |
Binding care | 18,000 | |
Total | 171,000 |
Table (8)
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