Question

Production, Direct Labor, Direct Materials, Sales Budgets, Budgeted Contribution Margin

Greiner Company makes and sells high-quality glare filters for microcomputer monitors. John Craven, controller, is responsible for preparing Greiner’s master budget and has assembled the following data for the coming year. The direct labor rate includes wages, all employee-related benefits, and the employer’s share of FICA. Labor saving machinery will be fully operational by March. Also, as of March 1, the company’s union contract calls for an increase in direct labor wages that is included in the direct labor rate. Greiner expects to have 6,500 glare filters in inventory on December 31 of the current year, and has a policy of carrying 30 percent of the following month’s projected sales in inventory. Information on the first four months of the coming year is as follows:

	January	February	March	April
Estimated unit sales	37,400	35,400	39,800	40,800
Sales price per unit	$81	$81	$77	$77
Direct labor hours per unit	2.90	2.90	2.50	2.50
Direct labor hourly rate	$19	$19	$21	$21
Direct materials cost per unit	$8	$8	$8	$8

Required:
Unless otherwise indicated, round all calculated amounts to the nearest dollar or unit.

1. Prepare the following monthly budgets for Greiner Company for the first quarter of the coming year.

a. Production budget in units:

Greiner Company
Production Budget (units)
For the First Quarter of the Coming Year
	January	February	March	Total
Unit sales
Desired ending inventory
Total units required
Less: Beginning inventory
Units produced

b. Direct labor budget in hours: Round your answers to two decimal places, if required.

Greiner Company
Direct Labor Budget (hours)
For the First Quarter of the Coming Year
	January	February	March	Total
Units produced
Direct labor hours per unit
Total labor budget (hours)

c. Direct materials cost budget:

Greiner Company
Direct Materials Cost Budget
For the First Quarter of the Coming Year
	January	February	March	Total
Units produced
Cost per unit	$	$	$	$
Total direct materials	$	$	$	$

d. Sales budget: Round unit selling price amounts to the nearest cent and use the same for subsequent requirements.

Greiner Company
Sales Budget (dollars)
For the First Quarter of the Coming Year
	January	February	March	Total
Unit sales
Unit selling price	$	$	$	$
Total sales revenue	$	$	$	$

2. Calculate the total budgeted contribution margin for Greiner Company by month and in total for the first quarter of the coming year. (CMA adapted)

Greiner Company
Budgeted Contribution Margin
For the First Quarter of the Coming Year
	January	February	March	Total
Sales revenue	$	$	$	$
Direct labor cost
Materials cost
Contribution margin	$	$	$	$

Answer 1

	January	February	March	April
Estimated unit sales	37,400	35,400	39,800	40,800
Sales price per unit	$81	$81	$77	$77
Direct labor hours per unit	2.9	2.9	2.5	2.5
Direct labor hourly rate	$19	$19	$21	$21
Direct materials cost per unit	$8	$8	$8	$8
a. Production budget in units:
Greiner Company
Production Budget (units)
For the First Quarter of the Coming Year
	January	February	March	Total
Unit sales	37,400	35,400	39,800	112,600
Desired ending inventory	10,620	11,940	12,240	12,240
Total units required	48,020	47,340	52,040	124,840
Less: Beginning inventory	6,500	10,620	11,940	6,500
Units produced	41,520	36,720	40,100	118,340
Greiner Company
Direct Labor Budget (hours)
For the First Quarter of the Coming Year
	January	February	March	Total
Units produced	41,520	36,720	40,100	118,340
Direct labor hours per unit	2.9	2.9	2.9	2.9
Total labor budget (hours)	120,408	106,488	116,290	343,186
Greiner Company
Direct Materials Cost Budget
For the First Quarter of the Coming Year
	January	February	March	Total
Units produced	41,520	36,720	40,100	118,340
Cost per unit	8	8	8	8
Total direct materials	332,160	293,760	320,800	946,720
Greiner Company
Sales Budget (dollars)
For the First Quarter of the Coming Year
	January	February	March	Total
Unit sales	37,400	35,400	39,800	112,600
Unit selling price	81	81	77
Total sales revenue	3,029,400	2,867,400	3,064,600	8,961,400
Greiner Company
Budgeted Contribution Margin
For the First Quarter of the Coming Year
	January	February	March	Total
Sales revenue	3,029,400	2,867,400	3,064,600	8,961,400
Direct labor cost	2,287,752	2,023,272	2,442,090	6,753,114
Materials cost	299,200	283,200	318,400	900,800
Contribution margin	442,448	560,928	304,110	1,307,486