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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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