Question: ILLUSTRATIVE EXAMPLE COMPLETE THE BUDGET FOR THE 3ND AND 4TH QUARTERS AND THE TOTAL 1. On January 1, 2021, Jake, Inc. has beginning inventory of
ILLUSTRATIVE EXAMPLE
COMPLETE THE BUDGET FOR THE 3ND AND 4TH QUARTERS AND THE TOTAL
1. On January 1, 2021, Jake, Inc. has beginning inventory of 50 skateboards. Jake estimates it will sell 1,000 units during the first quarter of 2021 with a 100 increase in sales each quarter. Jakes policy is to maintain an ending inventory equal to 5% of the next quarters sales. Each skateboard sells for P5,000. There are no work in process at the end of the quarter.
- Prepare a sales forecast per quarter
| Sales Forecast | First quarter | Second quarter | Third quarter | Fourth quarter | Total |
| Unit sales | 1,000 | 1,100 | ?? | ?? |
|
| Sales Price | P5,000 | P5,000 | P5,000 | P5,000 |
|
| Total Sales | P5,000,000 | P5,500,000 | ?? | ?? | P23,000,000 |
- Prepare a production budget per quarter
| Production Budget | First quarter | Second quarter | Third quarter | Fourth quarter | Total |
| Sales in units | 1,000 | 1,100 |
|
|
|
| Add Ending 5% | 55* | 60 |
| 70*** | 70 |
| Less Beg | (50)** | (55) |
|
| (50) |
| Reqd ProdUCTIONn | 1,005 | 1,105 |
|
| **** |
* .05 of next quarter sales 1,100= 55
** .05 of first quarter sales 1,000
*** first quarter of the following year will be 1,300+100=1,400 x .05
**** MUST TALLY WITH TOTAL PRODUCTION REQUIREMENT (LAST ROW)
DL requirement: Each production worker of Jake Inc can produce 1 skateboard in 4 hours. Regular working hours is Monday to Friday for eight hours a day. A worker is paid P320 per day.
C. Prepare a direct labor budget in hours and in pesos.
| DL Budget | First quarter | Second quarter | Third quarter | Fourth quarter | Total |
| Reqd Prodn | 1,005 | 1,105 |
|
|
|
| Req hours | 4 | 4 |
|
|
|
| Total hours | 4,020 | 4,420 |
|
|
|
| Hourly rate | P40 | P40 |
|
|
|
| Direct Labor | P160,800 | P176,800 |
|
| P739,200 |
DM Requirement: A skateboard is made up of three direct materials: 4 roller bearings, 1 baseboard, 4 screws A roller bearing costs P250, a baseboard costs P1,500, and a screw costs P25. The policy for raw materials is also to maintain an ending inventory equal to 5% of the next quarters production.
- Prepare a material purchase budget in quantity and in pesos.
| ROLLER BEARINGS | First quarter | Second quarter | Third quarter | Fourth quarter | Total |
| Reqd Prodn | 1,005 | 1,105 |
|
|
|
| 4 roller bearings | 4,020 | 4,420 |
|
|
|
| Desired 5% ending invty | 221 | 241 |
| * |
|
| Less beginning | (201) | (221) |
|
|
|
| Total purchases | 4,040 | 4,440 |
|
|
|
| Cost price | P250 | P250 |
|
|
|
| Total purchase cost | P1,010,000 | P1,110,000 |
|
|
|
| Total cost of DM used | P1,005,000 | P1,105,000 |
|
| P4,620,000 |
*1,305+100= 1,405 x 4= 5,620 x .05= 281
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