Harvest Beverages makes a full line of carbonated seltzer water in various flavors. Every can of seltzer is comprised of a can to put the liquid in, flavoring, and the carbonated water. The company is beginning to plan its production costs for the upcoming year and has asked you to help it prepare the various schedules needed to determine its cost of goods sold. It provides you with the following data:

• Projected sales are 500,000 cans in Quarter 1, 600,000 cans in Quarter 2,750,000 cans in Quarter 3, and 600,000 cans in Quarter 4. Quarter 1 sales next year are expected to be 550,000 cans.

• The company likes to keep 25% of the next quarter’s sales on hand in finished goods. It plans to start the year with that level of inventory for Quarter 1. The cost of beginning inventory is $28,000.

• Raw materials costs are $0.04 for each can, $0.05 per ounce of flavoring, and $0.005 per ounce for the carbonated water. Each finished can uses one metal can, 0.5 ounce of flavoring, and 12 ounces of carbonated water.

• The company keeps 20% of the next quarter’s raw materials needs on hand at the end of each preceding quarter. It starts the year with this percentage of Quarter 1’s projected sales on hand. Prices are unchanged from last year.

• Labor costs are $5 for 200 cans. This amounts to .005 labor hours per can produced.

• Monthly overhead is $6,000 for building rental, $2,500 for the canning machine, $3,500 for supervision, and $1,000 for miscellaneous costs. Variable overhead is $0.02 per can made.

REQUIRED:

For each quarter of the year, prepare:

a. A production budget

b. A materials budget for the two materials

c. A labor budget

d. An overhead budget

e. A cost of goods sold budget

f. An ending finished goods inventory budget for the year

g. If the company considers its cost of goods sold to be 70% of sales price, what price does the company have to charge for a finished can of seltzer?