DIB corporation’s managerial accountants and the budget committee is meeting in November to prepare the 2019 budget. Your task, as a member of the budget committee, is to prepare the 2019 budget given

the following data:

Sales: The company expects to sell 40% more units in 2019 than in each quarter of 2018. During 2018, sales were Q1: 40,000; Q2: 30,000; Q3: 60,000 and Q4: 50,000 units. The selling price per unit is expected to be $50 in the first three quarters, but only $40 per unit in Q4 because the substantial competition is expected to begin in Q4 of 2019. Sales are expected to be 40,000 units in Q1 of 2020.

Production: The company wants to maintain the ending finished goods inventory at 25% of the next quarter’s expected unit sales. Assume that this will hold to start Q1 of 2019 so that beginning finished goods inventory is (.25) (40,000) (1.4) = (.25)(56,000) =14,000 units.

Direct Material: Direct raw material requirements are 5 kilograms per unit of output produced and the cost is $1.5 per kilogram of materials. Management desires to maintain raw materials inventories at 5% of the next quarter’s production requirements. Assume the production requirements for the first quarter of 2020 are 315,000 kilograms.

Each unit of final goods produced requires 1.5 hours of direct labor time at $12 per hour.

Variable overhead costs are calculated per unit of direct labor hours as follows: indirect labor $0.2, indirect materials $0.1, maintenance $0.5.

ANNUAL fixed overhead costs are: supervisory salaries $200,000, maintenance $60,000, depreciation $80,000. They are allocated equally across quarters.

Instructions: Prepare the following budgets by quarter for the year 2019 (also show the cumulative or annual totals):
[Use the format shown in the textbook to prepare each quarter’s budget. Your work and calculations MUST be done using a Microsoft Excel spreadsheet including formulas]

(a) Sales budget

(b) Productionbudget

(c) Direct materials budget

(d) Directlaborbudget

(e) Manufacturing overhead budget

The marking scheme:

➢ Sales budget & Production budget: 35 marks

➢ Direct material budget & Direct labor budget: 30 marks

➢ Manufacturing overhead budget& budget structure: 35 marks

- Correct and well-organized budget structure

- Complete and clear column and row labels including the accumulated column entitled “Year”