Question

Scholastic Furniture, Inc. manufactures a variety of desks, chairs, tables, and shelf units that are sold to public school systems throughout the Midwest. The controller of the company's Desk Division is currently preparing a budget for the second quarter of the year. The following sales forecast has been made by the division's sales manager. April May 1 desk-and-chair sets desk-and-chair sets 15 gga desk-and-chair sets June Each desk-and-chair set requires 10 board feet of pine planks and 1.5 hours of direct labor. Each set sells for $50. Pine planks cost $.50 per board foot, and the division ends each month with enough wood to cover 10 percent of the next month's production requirements. The division incurs a cost of $20 per hour for direct-labor wages and fringe benefits. The division ends each month with enough finished-goods inventory to cover 20 percent of the next month's sales. Required: Complete the following budget schedules. 1. Sales budget. 2. Production budget (in sets). 3. Raw-material purchases. 4. Direct-labor budget.

Answer 1

1) Sales budget April June Sales (in sets) Sales price per set Sales revenue 10,000 50 $ 500,000 $ May 12,000 50 600,000 $ $ 15,000 50 750,000 2) Production Budget (in sets) Sales Add: Desired ending inventory Total requirements Less: Projected beginning inventory Planned production April 10,000 2,400 12,400 2,000 10,400 May | 12,000 3,000 15,000 2,400 12,600 June 15,000 3,000 18,000 3,000 15,000 Working Notes: Ending Inventory: April (May Sales x 20%) May (June sales x 20%) (12,000 x 20%) (15,000 x 20%) 2,400 3,000

3) Raw-material purchases: April 10,400 10 104,000 May 12,600 10 126,000 June 15,000 10 150,000 Planned production (sales) Raw material required per set (board feet) Raw material required for production (board feet) Add: Desired ending inventory of raw material, in board feet (10% of next month's requirement) Total requirements Less:Projected ending inventory of raw material, in board feet (10% of current month's requirement) Planned purchases of raw material (board feet) Cost per board feet Planned purchases of raw material (dollars) 12,600 116,600 15,000 141,000 16,000 166,000 12,600 128,400 10,400 106,200 0.50 53,100 50 15,000 151,000 0.50 75,500 $ $ $ $ 64,200 $ Working Notes Ending Inventory April (May Production ® 10%) May (June Production ® 10%) (126,000 x 10%) (150,000 x 10%) 12,600 15,000 4) Direct-labor budget Planned production (sets) Direct-labor hours per set Direct-labor hours required Cost per hour Planned direct-labor cost April 10,400 1.50 15,600 20 $ 312,000$ May 12,600 1.50 18,900 20 $ 378,000 $ June 15,000 1.50 22,500 20 450,000 $