Question & Answer: 3. Refer to r Refer to requirement 2. How could the reduction in material and labor costs be accomplished there any problems with this…..

3. Refer to r Refer to requirement 2. How could the reduction in material and labor costs be accomplished there any problems with this plan? 6-32 Revenue and production budgets. (CPA, adapted) The Sabat Corporation manufactures and sells two products: Thingone and Thingtwo. In July 2013, Sabats budget department gathered the following data to prepare budgets for 2014 2014 Projected Sales Product Units Price Thingone 62,000 $172 Thingtwo 4,000 $264 2014 Inventories in Units Expected Target January 1, 2014 December 31, 2014 Product Thingone Thingtwo 21,000 3,000 26,000 14,000 The following direct materials are used in the two products: Amount Used per Unit Thingone Thingtwo Unit pound pound each Direct Material
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3. Refer to r Refer to requirement 2. How could the reduction in material and labor costs be accomplished there any problems with this plan? 6-32 Revenue and production budgets. (CPA, adapted) The Sabat Corporation manufactures and sells two products: Thingone and Thingtwo. In July 2013, Sabat’s budget department gathered the following data to prepare budgets for 2014 2014 Projected Sales Product Units Price Thingone 62,000 $172 Thingtwo 4,000 $264 2014 Inventories in Units Expected Target January 1, 2014 December 31, 2014 Product Thingone Thingtwo 21,000 3,000 26,000 14,000 The following direct materials are used in the two products: Amount Used per Unit Thingone Thingtwo Unit pound pound each Direct Material

Expert Answer

 

1 Revenue budget
Units Price Total
Thing one 62000 172 10664000
Thing two 46000 264 12144000
Budgeted Revenue 22808000
3 Production Budget
Thing one Thing two
Budgeted sales in units 62000 46000
Add: Targeted finished goods inventory,closing 26000 14000
Total requirements 88000 60000
Deduct: Finished goods inventory, opening -21000 -13000
Units to be produced 67000 47000
4 Direct materials purchases budget
in quantities
A B C
Direct Materials to be used in production 335000 201000
Thing one ( budgeted production of
(67000 units 5 pounds, 3 pounds)
Thing two ( Budgeted production of 282000 188000 94000
(47000 units at 6,4,2)
Add: Target ending inventories, closing 40000 35000 12000
Total requirements 657000 424000 106000
Deduct: beginning inventory -37000 -32000 -10000
Direct materials to be purchased 620000 392000 96000
5 Direct Materials purchases budget in dollars
Budgeted purchases Expected purchases
Units Price per unit
Direct Materials A 620000 11 6820000
Direct Material B 392000 6 2352000
Direct Material c 96000 5 480000
Budgeted purchases 9652000
6 Direct Material Labour Budget (in dollars)
Budgeted production Direct Manufacturing labor hours unit Total hours Rate per hour Total
Thing one 67000 3 201000 11 2211000
Thing two 47000 4 188000 14 2632000
4843000
7 Budgeted finished goods inventory Total
Thing One
A 5 X 11 55
B 3 X6 18
C 0 X5 0 73
Direct Manufacturing labor costs per unit 3×11 33
Manfacturing overheads cost per unit of thing one 19 x3 57 90
Budgeted Manufacturing costs per unit 163
Finished goods inventory of thing one 26000 x 163 4238000
Thing two
A 6*11 66
B 4*6 24
C 2*5 10 100
Direct Manufacturing labor costs per unit 14*4 56
Manfacturing overheads cost per unit of thing one 19*4 76 132
Budgeted Manufacturing costs per unit 232
Finshed goods inventory of thingtwo 14000*232 3248000
Budgted finished goods inventory 7486000

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