Leitner Manufacturing, Inc. produces control valves used in the production of oil field equipment. The control...

 

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Leitner Manufacturing, Inc. produces control valves used in the production of oil field equipment. The control valves are sold to various gas and oil engineering companies throughout the US. Projected sales in units for the coming four months are as follows: January 20 000 February 25 000 March 30 000 April 30 000 The following data pertain to production policies and manufacturing specifications followed by Leitner: Finished goods inventory on 1 January is 13 000 units. The desired ending inventory for each month is 70% of the next month's sales. a. b. The data on materials used are as follows: b. The data on materials used are as follows: Direct material Per-unit usage Unit cost Part 714 R4 Part 502 3 R3 Inventory policy dictates that sufficient materials be on hand at the beginning of the month to produce 50% of that month's estimated sales. This is exactly the amount of material on hand on 1 January. С. The direct labour used per unit of output is 2 hours. The average direct labour rate per hour is R15. d. Each month, overhead estimates are based on direct labour hours. Fixed cost component Variable cost component Supplies R1.00 Power RO.20 Maintenance R28 000 R1.10 Supervision R14 000 Depreciation R100 000 Таxes R7 000 Other R56 000 R1.60 Monthly selling and administrative expenses are also estimated based on units sold. Variable costs е. Fixed costs Salaries R30 000 Commissions RO.75 Depreciation Shipping R5 000 R2.60 Other R10 000 RO.40 f. The unit selling price of the control valve is R90 g. In February, the company plans to purchase land for future expansion. The land costs R90 000 h. All sales and purchases are for cash. Cash balance on 1 January equals R162 900. If the firm develops a cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage. Any cash borrowed is repaid one month later, as is the interest due. The interest rate is 12% per annum. Required: Prepare the following for the first quarter: Sales budget Production budget 1.1 1.2 1.3 Direct materials purchases budget Direct labour budget Overhead budget Selling and administrative budget 1.4 1.5 1.6 Ending finished goods inventory budget Cost of goods sold budget Budgeted income statement (ignore taxes) Cash budget 1.7 1.8 1.9 1.10 Leitner Manufacturing, Inc. produces control valves used in the production of oil field equipment. The control valves are sold to various gas and oil engineering companies throughout the US. Projected sales in units for the coming four months are as follows: January 20 000 February 25 000 March 30 000 April 30 000 The following data pertain to production policies and manufacturing specifications followed by Leitner: Finished goods inventory on 1 January is 13 000 units. The desired ending inventory for each month is 70% of the next month's sales. a. b. The data on materials used are as follows: b. The data on materials used are as follows: Direct material Per-unit usage Unit cost Part 714 R4 Part 502 3 R3 Inventory policy dictates that sufficient materials be on hand at the beginning of the month to produce 50% of that month's estimated sales. This is exactly the amount of material on hand on 1 January. С. The direct labour used per unit of output is 2 hours. The average direct labour rate per hour is R15. d. Each month, overhead estimates are based on direct labour hours. Fixed cost component Variable cost component Supplies R1.00 Power RO.20 Maintenance R28 000 R1.10 Supervision R14 000 Depreciation R100 000 Таxes R7 000 Other R56 000 R1.60 Monthly selling and administrative expenses are also estimated based on units sold. Variable costs е. Fixed costs Salaries R30 000 Commissions RO.75 Depreciation Shipping R5 000 R2.60 Other R10 000 RO.40 f. The unit selling price of the control valve is R90 g. In February, the company plans to purchase land for future expansion. The land costs R90 000 h. All sales and purchases are for cash. Cash balance on 1 January equals R162 900. If the firm develops a cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage. Any cash borrowed is repaid one month later, as is the interest due. The interest rate is 12% per annum. Required: Prepare the following for the first quarter: Sales budget Production budget 1.1 1.2 1.3 Direct materials purchases budget Direct labour budget Overhead budget Selling and administrative budget 1.4 1.5 1.6 Ending finished goods inventory budget Cost of goods sold budget Budgeted income statement (ignore taxes) Cash budget 1.7 1.8 1.9 1.10

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11 Sales Budget January February March Sales Units 20000 25000 30000 Sales Amount 1800000 2250000 2700000 Sales Units x 90 per unit 12 Production Budg... View the full answer