Question

22.

The Cat & Company Corporation manufactures and sells two products: Thingone and Thingtwo. In July 2013, the corporation’s budget department gathered the following data to prepare budgets for 2014:

2014 Projected Sales:

Product               Units                     Price

Thingone             62,000 units       $172

Thingtwo             46,000 units       $264

2014 Projected Inventory in Units:

Product               January 1, 2014                December 31,2014

Thingone                  21,000                                             26,000

Thingtwo                  13,000                                             14,000

The following direct materials are used in the two products

Amount Used per Unit

Direct Material                 Unit                      Thingone             Thingtwo

A                            pound                           5                          6

B                            pound                           3                          4

C                            each                             0                          2

Projected data for 2014 for direct materials are:

                                   Anticipated              Expected Inventories           Expected Inventories

Direct Material     Purchase Price              January 1,2014                    December 31, 2014

A                            $11                      37,000 lb.                                          40,000 lb.                               

B                            $6                         37,000 lb.                                          35,000 lb.

C                            $5                         10,000 units                                     12,000 units

Projected direct manufacturing labor requirements and rates for 2014 are:

Product               Hours per Unit                  Rate per Hour

Thingone                        3                                  $11

Thingtwo                        4                                  $14

Manufacturing overhead is allocated at the rate of $19 per direct manufacturing labor-hour. Based on the preceding projections and budget requirements for Thingone and Thingtwo, answer the following questions:

1. What is the total projected revenue in dollars?
2. What are the production requirements for each product?
3. What is the direct material purchases budget in quantities?
4. What is the direct material purchases budget in dollars?
5. What is the direct manufacturing labor budget in dollars?
6. What is the budgeted finished goods inventory at December 31,2014 in dollars?

Answer 1

a. Total Projected Revenue = 62000 x 172 + 46000 x264 = $22,808,000

b.

Production Budget
	Thingone	Thingtwo
Sales units	62000	46000
Add : Closing Stock Required	26000	14000
Total Goods Required	88000	60000
Less : Opening Stock	21000	13000
Production Required	67000	47000

c & d

	Material A	Material B	Material C
Thingone	335000	201000	0
Thingtwo	282000	188000	94000
Raw Material for Production	617000	389000	94000
Add : Closing Stock Required	40000	35000	12000
Total Material Required	657000	424000	106000
Less : Opening Stock	37000	37000	10000
Material to be purchased (Quantity)	620000	387000	96000
Rate per unit	$                  11.00	$                 6.00	$                       5.00
Purchase cost	$          68,20,000	$       23,22,000	$               4,80,000

e.

Direct Labor Budget
	Thingone	Thingtwo
Production Required	67000	47000
Labor hours per unit	3	4
Total Labor Hours Required	201000	188000
Labor Rate per hour	$                  11.00	$               14.00
Labor Amount	$          22,11,000	$        26,32,000

f. Cost per unit
Thingone = $5x11+3x6+0x5+3x11 = $106
Thingtwo = $6x11+4x6+2x5+4x14 = $156

Finished goods inventory = $106 x 26000 + 156 x 14000 = $4940000