Production, direct materials, and direct labor budgets Gerrad Manufacturing has projected sales of its product for the next six months as follows: January 480 units February 1120 units March 1,600 units April 1440 units May 640 units 480 units June The finished product requires 3 pounds of raw material and 10 hours of direct labor. Gerrad tries to maintain a Finished Goods ending inventory equal to the next two months of sales and a Raw Material ending inventory equal to one-half of the current month's production needs. January's beginning inventories are expected to conform to company policy. a. Prepare a production budget for February, March, and April. Note: Use a negative sign in your schedule to indicate that an amount is subtracted. February March April Sales El 1,120 -> 1,600 - 3,040 2,080 -> 1,440 1,120 Total units needed 4,160 3,680 B1 2,720 x Units produced 1,440 3,040 x 640-> 2,560 2,080 X 480 b. Prepare a forecast of the units and cost of raw material that will be required for February, March, and April. The expected cost per pound of raw material is expected to be $2 in February, $2.30 in March, and $2.40 in April. Reced raw material units February March April 4,320 x 1,920 x 1,440 x 2.456 4:34 AM b. Prepare a forecast of the units and cost of raw material that will be required for February, March, and April. The expected cost per pound of raw material is expected to be $2 in February, $2.30 in March, and $2.40 in April. Required raw material units Cost of raw material purchases $ February 4320 X 8,640 x 5 March 1.920 X April 1.440 X 4,416 * $ 3,456 X c. Prepare a direct labor budget (assuming a $12 per hour rate) for February, March, and April. Units produced DLHS per unit February 1,440 10 March April 640 10-> 480 10 Total hours 14,400 6,400 4,800 Cost per DLH S 12 $ Cost of DL S 172,800 $ 12 $ 76,800 $ 12- 57,600 Production budget Nafari Company's sales budget has the following unit sales projections for each quarter of Year 4: Quarter January-March April-June July-September October-December Total Unit Sales 645.000 $16,000 588.000 660.000 2.712,000 Sales for the first quarter of Year 5 are expected to be 720,000 units. Ending inventory of finished goods for each quarter is scheduled to equal 10 percent of the next quarter's budgeted sales. The company's ending inventory on December 31, Year 3, is estimated at 56,700 units. Develop a quarterly production budget for Year 4 and for Year 4 in total. Note: Use a negative sign in your schedule to indicate that an amount is subtracted. Sales 1st 648,000 E 81,600 Total 729,600 Bl (56.700) 2nd 816,000 58,800 874,800 (81,600) QUARTER 3rd 588,000 4th 66,000 654,000 660,000 72,000 732,000 Total 2,712,000 Production 672.900 793,200 (58,800) 595,200 278,400 x 2,990,400 x (66,000) (263,100) x 666,000 2,727,300