Byron Bay Surf Company has the following budgeted sales for the next six-month period:...
Question:
Byron Bay Surf Company has the following budgeted sales for the next six-month period: |Month|Unit Sales
| June | 90,000 |
| July | 120,000 |
| August | 210,000 |
| September | 150,000 |
| October | 180,000 |
| November | 120,000 |
The company sells the product at a price of $100 per unit. There were 24,000 units of finished goods in inventory at the beginning of July. Plans are to have an inventory of finished products that equal 20% of the unit sales for the next month.
Five kilograms of materials are required for each unit produced. To make each unit of FG it needs $10 of direct labor cost and $10 of manufacturing overhead cost. Each kilogram of material costs $8 ($6 in April 2015). Ending inventory levels for materials are equal to 30% of the production needs for the next month. Material inventory at the beginning of July was $1,242,000 (207,000 kilograms). Assume the company uses a FIFO inventory method for both direct materials and finished goods.
Required:
(a) Prepare sales budgets in units and dollars for July and August.
(b) Prepare production budgets in units for July and August.
(c) Prepare direct materials purchase budgets (in kilograms and dollars) for July.
(d) Calculate the amount of budgeted cost of goods sold for July.
The Master Budget:
The master budget almost always starts with the sales budget. When the estimated sales units and sales revenue is known, the production and direct materials budgets can be prepared.
Answer and Explanation: 1
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(a)
Byron Bay Surf Company
Sales Budget for July and August
| July | August | |
|---|---|---|
| Sales (units) | 120,000 | 210,000 |
| Selling Price per unit | $100 | $100 |
| Projected... |
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