The Sweetwater Candy Company is preparing its production budget for the first quarter (January-March) of next year. The company is moving ahead with the expansion and using the sales budget based on 25,000 units for next year. It purchases chocolate from a European chocolatier. Sweetwater makes its own fillings for the chocolates, produces the filled chocolates, and boxes the final product at its facility in Fort Collins. 

• Chocolate is purchased by the pound and costs $5 per pound or $0.3125 per ounce. NOTE: 1 pound = 16 ounces. 

• Budgeted sales for the next five months follow: January February March April May Sales in units 1,200 1,000 1,600 1,400 1,800 

• The company desires the ending Finished Goods Inventory to be equal to 30% of the next month's sales in units. 

• The December 31 balance of Finished Goods inventory is 340 units. 

• Company policy calls for a given month's ending raw materials inventory to equal 30% of the next month's materials requirements. The actual December 31 raw materials inventory is 6,000 ounces. Each finished unit requires 18 ounces of chocolate. March 31 raw materials inventory is 8,208 ounces. 

• Each finished unit requires 0.125 hours of direct labor at $20 per hour. 

• Variable overhead is applied at the rate of $29.85 per direct labor hour. 

• The company budgets fixed overhead of $5,520 per month. 

Required: 

(A.) Prepare the first quarter production budget to determine the number of units (i.e., boxes of chocolates) to be produced. 

(B.) Prepare the first quarter direct materials (chocolate) budget; include the number of ounces to be purchased and the dollar cost of purchases. 

(C.) Prepare the direct labor budget for the first quarter. 

(D.) Prepare the factory overhead budget for the first quarter.

Answer rating: 100% (QA)

A Production budget January February March Total add sales units 1200 1000 1600 Workings less Beginn... View the full answer