Problem - Jones Corporation has the following budgeted sales for the selected four-month period:
Month - Unit Sales
July - 20,000
August - 35,000
September - 25,000
October - 30,000
Sales price per unit is - $180
Plans are to have an inventory of finished product equal to 20% of the unit sales for the next month. There was 4,000 units in beginning inventory on July 1st.
Three pounds of materials are required for each unit produced. Each pound of material costs $20. Inventory levels for materials equal 30% of the needs for the next month.
Desired ending inventory for September is 25,200 pounds of material. Beginning inventory for July was 20,700 pounds of material.
Each unit requires 0.6 hours of direct labor and the average wage rate is $16 per hour.
Variable overhead rate is $3.50 per direct labor hour. There is also fixed overhead of $22,000 per month.
The company pays a 3% commission on sales.
Company has fixed selling and administrative expenses as follows:
Rent $6,000/month
Utilities $1,200/month
Advertising $400/month
Office Salaries $35,000/month
Required:
A. Prepare a sales budget for July, August, and September and in total for the quarter.
B. Prepare production budgets for July, August, and September and in total for the quarter.
C. Prepare a direct materials purchases budget in pounds and dollars for July, August, and September and in total for the quarter.
D. Prepare a direct labor budget in hours and total cost for July, August and September and in total for the quarter.
E. Prepare an overhead budget for July, August and September and in total for the quarter.
F. Prepare a selling and administrative expenses budget for July, August and September and in total for the quarter.
G. Prepare an ending finished goods inventory budget for the quarter (Hint: You have already calculated the desired ending finished goods inventory amount. Assume a stable per unit rate and round the per unit fixed factory overhead rate to two decimal places.)
H. Prepare a cost of goods sold budget for the quarter
I. Prepare a budged income statement for the quarter-the company falls into the 35% tax bracket for income taxes.