Reference no: EM132472136

New Production Equipment Purchase

The budget director of the Freeman Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month.

Selected information concerning sales and production data for February 20X9 is presented below.

1. Estimated Sales of King and Queens Chairs for February by Sales Territory

Midwest Region

1. King680 units at $820 per unitQueens850 units at $540 per unit

Southern Region

1. King390 units at $820 per unitQueens480 units at 4540 per unit

International Region

1. King420 units at $870 per unitQueens330 units at $600 per unit
2. Estimated Inventories at February 1, 20X9

Direct Materials

1. Fabric470 square yardsWood620 linear ftFiller300 cubic ftSprings710 units

Finished Products

King105 units

Queens35 units

1. Desired Inventories at February 28, 20X9

Direct Materials

Fabric430 square yards

Wood680 linear ft

Filler350 cubic ft

Springs                                   660 units

Finished ProductsKing                  95 units

Queens                                      40 units

1. Direct Materials Used in Production
2. In Manufacture of King
3. Fabric6.5 square yards per unit of productWood42 linear ft per unit of productFiller4.6 cubic ft per unit of productSprings18 units per unit of product

In Manufacture of Queens

1. Fabric4.5 square yards per unit of productWood30 linear ft per unit of productFiller3.8 cubic ft per unit of productSprings14 units per unit of product
2. Anticipated Purchase Price for Direct Materials for Both Products
3. Fabric$16.00 per square yearWood$9.50 per linear ftFiller$4.50 per cubicSprings

Direct Labor Requirements
King

1. Framing Department1.2 hours at $16 per hourCutting Department0.5 hours at $19 per hourUpholstery Department0.8 hours at $20 per hour

Queens

Framing Department1.0 hours at $16 per hourCutting Department0.4 hours at $19 per hourUpholstery Department0.6 hours at $20 per hour

1. sales budget for February 20X9.
2. production budget for February 20X9.
3. direct materials purchases budget for February 20X9.
4. direct labor budget for February 20X9.

Question 1: The production supervisor wants to purchase new production equipment for April 20X9. The goal is to replace the labor-intensive production system. Please memo to the executive team explaining why new production equipment could affect the production and purchases budgets.