Question

Prepare the sales budget, production budget, direct materials budget, direct labor budget, manufacturing overhead budget, SGA budget, and budgeted income statement for ABC Company for the year, given the following information:

ABC expects to sell 10,000 units for the year at $175 per unit.

ABC Company begins the year with 2,000 units and desires ending inventory of 7,000 units.

To produce 1 unit, it takes the following:

DIRECT MATERIALS:

To produce 1 unit: 10 pounds

Waste per unit: 1 pound

Direct materials cost $3 per pound.

ABC Company begins the year with 1,000 pounds of direct materials on hands and desires to end the year with 2,000 pounds of direct materials on hand.

DIRECT LABOR:

It takes 4 hours to produce 1 unit of finished product. The pay rate for employees is $15 per hour

OVERHEAD:

Fixed overhead per year: $30,000

Variable overhead: $5 per unit produced

SGA Expenses:

Fixed SGA Expenses: $10,000 per year

Variable SGA Expenses: $5 per unit sold

Answer 1

1)

ABC company Sales Budget
Unit sales	10000
unit price	175
Sales	1750000

2)

ABC company Production Budget
Unit sales	10000
Ending finished goods desired	7000
Total units required	17000
less:Beginning finished goods	(2000)
units to be produced	15000

3)

units to produced	15000
raw material required per unit [10+1]	11
Total material required for production	165000
Ending material desired	2000
Total material required	167000
less:Beginning raw material	(1000)
Raw material purchased	166000
material cost per pound	3
Total cost of purchase	498000

4)

Direct labor budget
Unit to produce	15000
Hours required per unit	4
Total hours required for production	60000
Rate per hour	15
Total labor cost	900000