Reference no: EM131872408

Production Budgets Problem -

The Hale Company finished their sales projections for the coming year. The company produces one product. Part of next year's sales projections are as follows:

	July	August	September	October	November
Projected Sales in units	100,000	125,000	156,000	165,000	185,000

The budget committee has also compiled the following information on inventories:

	Raw materials	Work-in-Process	Finished Goods
Ending Balance, June	22,000 lbs	None	13,000 units
Desired ending levels (monthly)	5% of next month's production needs	None	12% of next month's sales

Engineering has developed the following standards upon which the production budgets will be developed:

Item	Standard
Materials usage	5 lbs per unit
Material price per pound	$1.50 per pound
Labor usage	0.4 hours per unit
Labor rate	$30 per  hour
Machine hours	3 machine hours per unit

The Hale Company uses a modified allocation method for allocating overhead costs. The rates that will be used in the coming year are as follows:

Overhead item	Allocation rate
Utilities	$0.50 per machine hour
Inspection	$10 per unit produced
Factory supplies	$2 per unit produced
Depreciation	$35,000 per month
Supervision	$12,000 per month

Required: Prepare the following production budgets for July, August, and September for the Hale Company:

1. Production budget

2. Materials purchase budget

3. Direct labor budget

4. Overhead budget

For the quarter (quarter totals only), prepare the:

5. Cost of goods manufactured budget