Part C Bottoms-Up Operating Budget

Answer the questions below regarding the bottoms-up budget summary displayed next.

Data:

• Sales in the budget are 300,000 units sold at $9 per unit
• The per unit cost of material, labour and factory overhead are indicated above
• Desired finished goods ending inventory is 30,000 units where beginning inventory was 20,000 units
• Material used in in production in dollars is estimated at $620,000
• Desired material ending inventory is $60,000 where beginning inventory was $40,000
• Labour hours for production is estimated at 77,500 hours at $12 per hour
• Factory overhead is estimated at $5 per labour hour worked
• Beginning work in process inventory is $40,000
• Selling and administrative costs are $750,000 in the Budget

Questions regarding the bottoms-up budget

1. Show the calculation of sales
2. Show the calculation of cost of goods sold (COGS)
3. How much material is purchased in the budget
4. What are total labour costs in the budget
5. What are total factory overhead costs in the budget
6. Show the development of work in process inventory in the budget
7. Show the development of the cost of finished goods inventory in the budget
8. What is a major driver of cash and, thus, should be an important execution goal coming out of the budget

Income Statement Budget 2,700,000 Sales Per unit Costs Material Labour Overhead COGS 2.00 3.00 1.25 6.25 600,000 900,000 375,000 1,875,000 Gross Margin 825,000 Selling and Admin Costs 750,000 Operating Profit 75,000 Last year Cash Material Work in Process Finished Goods Fixed Assets Balance Sheet Budget 50,000 60,000 102,500 187,500 100,000 500,000 45,000 40,000 40,000 125,000 100,000 350,000 Debt Common Stock Retained Earings 250,000 100,000 150,000 500,000 175,000 100,000 75,000 350,000