Question

The GBCoffee Company roasts and sells high quality certified sustainable coffee beans. The final one pound bags of roasted whole coffee beans has two direct materials – coffee beans and packaging. GBCoffee is preparing budgets for the fourth quarter ending December 31, 2019. For each requirement below prepare budgets by month for October, November, and December, and a total budget for the quarter.

1. The previous year’s sales for the corresponding period were:

October                 50,000 bags

November             55,000 bags

December             90,000 bags

January                  75,000 bags

February                60,000 bags

The company expects the above volume of coffee sales to increase by 8% for the period October 2019 – February 2020. The budgeted selling price for 2019 is $19.50 per bag. The company expects 35% of its sales to be cash (COD) sales. The remaining 65% of sales will be made on credit.

**Each bag of coffee produced requires 0.25 hours of direct labor. GBCoffee pre-washes the green beans and then uses a collection of hand-cranked coffee roasters to achieve the perfect ‘old school’ roast. Each hour of direct labor costs the company $20. Prepare a Direct Labor budget.

Answer 1