Chapter $8$

OBJECTIVE

$2$

Berring $8\mathrm{.}16$ Sales and Production Budgets are given below.

$\backslash$table$[[,,$Standard$],[,$Deluxe,$90,000],[$First quarter,$12,000,88,400],[$Second quarter,$14,300,92,000],[$Third quarter,$16,600,91,600],[$Fourth quarter,$20,000,]]$

sident of the company believes that the projected sales are realistic and can be achieved by the company. In the factory, the production supervisor has received the projected sales figures and gathered information needed to compile production budgets. He found that $1,300$ deluxes and $1,170$ standards were in inventory on January $1.$ Comprer's sales for deluxes and $10$ percent ending inventory should equal $20$ percent of the next quarters salest of next quarter's sales for standards.

Required:

Prepare a sales budget for each quarter and for the year in total. Show sales by product and in total for each time period.

What factors might Berring Company have considered in preparing the sales budget?

Prepare a separate production budget for each product for each of the first three quarters of the year.

OBJECTIVE

$2$

the year.

Exercise $8\mathrm{.}17$ Direct Materials Purchases Budget: Direct Labor Budget

Crescent Company produces stuffed toy animals; one of these is "Arabeau the Cow." Each Arabeau takes $0\mathrm{.}20$ yard of fabric $($white with irregular black splotches$)$ and eight ounces of polyfiberfill. Fabric costs $$3\mathrm{.}50$ per yard and polyfiberfill is $$0\mathrm{.}10ws.$ Crescent has budgeted production of Arabeaus for the next four months as

$\backslash$table$[[,$Units$],[$October$,42,000],[$November$,90,000],[$December$,50,000],[$January$,40,000]]$

Inventory policy requires that sufficient fabric be in ending monthly inventory to satisfy $20$ percent of the following month's production needs and sufficient polyfiberfill be in inventory to satisfy $40$ percent of the following month's production needs. Inventory of fabric and polyfiberfill at the beginning of October equals exactly the amount needed to satisfy the inventory policy.

Each Arabeau produced requires $($on average$)0\mathrm{.}10$ direct labor hour. The average cost of direct labor is $$15$ per hour.

Required:

Prepare a direct materials purchases budget of fabric for the last quarter of the year showing purchases in units and in dollars for each month and for the quarter in total.

Prepare a direct materials purchases budget of polyfiberfill for the last quarter of the year showing purchases in units and in dollars for each month and for the quarter in total.

Prepare a direct labor budget for the last quarter of the year showing the hours needed and the direct labor cost for each month and for the quarter in total.