Prepare the production budgets

Assignment Help Managerial Accounting

Reference no: EM133049428

Discussion

DQ 1. When should a company prepare budgets? What are the advantages of preparing budgets?
DQ 2. Why are human factors crucial in budgeting?

Exercises

1. Freedom Pty Ltd manufactures and sells camping equipment. Included in the company's line of products are two type of backpacks, type A and type B. Sales of backpacks for the first quarter of the 2019-2020 financial year are budgeted as follows:
Sales in Units

	A	B
January	7000	16 000
February	8000	18 000
March	9000	19 000

Type A backpack sells for $20 and type B sells for $15.

Required:
Prepare a monthly sales budget in dollars for this quarter.

2. WD Co. has forecast 2019-2020 sales as follows

1	2	3	4
Budget Sales (units) 6000	8000	11 000	10 000

Budget Sales (units) 6000 8000 11 000 10 000
Unit selling price is $15. Each quarter's ending inventory is to be 20% of the following quarter's budgeted sales.

Required:
Prepare the production budgets for the first three quarters of 2019-2020.

Problems

1. Scarborough Corporation manufactures and sells two products: D-One and D-Two. In July 2018, Scarborough budget department gathered the following data to prepare budgets for 2019:

2019 Projected Sales:

Product	Units	Price
D-One	60,000	$165
D-Two	40,000	$250

2019 Inventories in Units:

	Expected Target
Product	January 1, 2019	December 31, 2019
D-One	20,000	25,000
D-Two	8,000	9,000

The following direct materials are used in the two products:

	Amount Used per Unit
Direct material	Unit	D-One	D-Two
A	kilogram	4	5
B	kilogram	2	3
C	each	0	1

Projected data for 2019 with respect to direct materials are as follows:

Direct material	Anticipated Purchase price	Expected Inventories January 1, 2019	Target Inventories December 31, 2019
A	$12	32,000 kg	36,000 kg
B	5	29,000 kg	32,000 kg
C	3	6,000 units	7,000 units

Projected direct labour requirements and rates for 2019 are as follows:

Product	Hours per unit	Rate per hour
D-One	2	$12
D- Two	3	16

Based on the preceding projections and budget requirements for D-One and D-Two, prepare the following budgets for 2019.

Required:
a) Sales budget
b) Production budget
c) Direct material purchases budget (in quantities)
d) Direct material purchases budget (in dollars)
e) Direct labour budget (in dollars)

Reference no: EM133049428

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