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Question: my question is related to sales production and purchases budgets...

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My question is related to sales, production and purchases budgets; activity-based overhead: manufacturer.

 

George Ltd manufactures and sells two different types of coils used in electric motors. In September, Jessica, the management accountant, compiled the following data for the upcoming annual budget.

Use of direct material:

  Amount used per unit
Direct material Light coil Heavy coil
Sheet metal 4 kg 5 kg
Copper wire 2 kg 3 kg
Platform   1 unit

Raw material prices and inventory levels:

  Anticipated purchase price $ Expected inventories 1 Jan Desired inventories 31 Dec
Raw material $8 32 000 kg 36 000 kg
Copper wire $5 29 000 kg 32 000 kg
Platform $3 6 000 units 7 000 units
       

 

Direct labour requirements and rates:

 

Product 

Hours per unit

Rate per hour

Light coil

2

$30

Heavy coil

3

$40

 

Manufacturing overhead

Activity

Cost per unit of activity driver

 

Material handling:

 

Sheet metal and copper wire

$0.50 per kg of raw material purchased

Platforms

$0.10 per unit purchased

Machine related

$1.50 per machine hour*

Shipping

$2.00 per coil shipped

General manufacturing overhead

$1.20 per direct labour hour

*Total annual machine hours are 100 000 for light coils and 200 000 for heavy coils.

 

 Finished goods inventories (in units):

Product

Expected 1 Jan

Desired 31 Dec

Light coil

20 000

25 000

Heavy coil

8 000

9 000

 

Sales forecast:

Product

Units

Price $

Light coil

60 000

$130

Heavy coil

40 000

$190

 

Prepare the following budgets:

 

1. Sales budget (in dollars $)

2. Production budget (in units)

3. Direct material purchases budget (in quantities)

4. Direct material purchases budget (in dollars $)

5. Direct labour budget (in dollars $)

6. Manufacturing overhead budget (in dollars $)

Thanks!

Nadia

 

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