Budgeting for Sales, Production, Direct Materials, Direct Labor, and Manufacturing Overhead. Hershels Chocolate produces chocolate bars and sells them by the case $(1$ unit $=1$ case$).$ Information to be used for the operating budget this coming year follows: 

 

 

 Average sales price for each case is estimated to be $$85.$ Unit sales for this coming year, ending December $31,$ are expected to be as follows: 

 

First quarter $80,999$

Second quarter $84,500$

Third quarter $88,000$

Fourth quarter $97,000$

Finished goods inventory is maintained at a level equal to $15$ percent of the next quarters sales. Finished goods inventory at the end of the fourth quarter budget period is estimated to be $13,000$ units.

Each unit of product requires $5$ pounds of cocoa beans for direct materials, at a cost of $$3$ per pound. Management prefers to maintain ending raw materials inventory equal to $10$ percent of next quarters materials needed in production. Raw materials inventory at the end of the fourth quarter budget period is estimated to be $43,000$ pounds.

Each unit of product requires $0\mathrm{.}10$ direct labor hours at a cost of $$14$ per hour.

Variable manufacturing overhead costs are

Indirect materials $$0\mathrm{.}20$ per unit

Indirect labor $$0\mathrm{.}15$ per unit

Other $$0\mathrm{.}10$ per unit

Fixed manufacturing overhead costs per quarter are

Salaries $$80,000$

Other $$70,000$

Depreciation $$55,625$

As the production manager, what concerns, if any, do you have about production requirements for each of the four quarters?

Answer rating: 100% (QA)

As the production manager for Hershels Chocolate there are several concerns that need to be addressed regarding production requirements for each of th... View the full answer