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Assignment Operational Budget

The document provides data for preparing various budgets for a company producing two types of granite tables. The summaries are: 1) Revenue, production, direct materials usage and purchases, and direct manufacturing labor cost budgets are prepared based on the sales forecast, beginning and target ending inventory levels, direct material and labor content and costs for each product. 2) The direct materials usage budget calculates the board feet of wood and square feet of granite needed for production. The purchases budget determines the quantities of each material to be purchased. 3) The direct manufacturing labor costs budget calculates the labor hours and costs for each product based on their labor requirements and the hourly wage rate.

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Bona Hirko
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136 views

Assignment Operational Budget

The document provides data for preparing various budgets for a company producing two types of granite tables. The summaries are: 1) Revenue, production, direct materials usage and purchases, and direct manufacturing labor cost budgets are prepared based on the sales forecast, beginning and target ending inventory levels, direct material and labor content and costs for each product. 2) The direct materials usage budget calculates the board feet of wood and square feet of granite needed for production. The purchases budget determines the quantities of each material to be purchased. 3) The direct manufacturing labor costs budget calculates the labor hours and costs for each product based on their labor requirements and the hourly wage rate.

Uploaded by

Bona Hirko
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Lunar International College

Post graduate Studies

MBA

Group Assignment

Total mark 20%


Preparations of master budget especially operational budget

The following data are available for the 2012 budget:

Direct materials Red Oak $ 7 per board foot (b.f.) (same as in 2011)

Granite $10 per square foot (sq. ft.) (same as in 2011)

Direct manufacturing labor $20 per hour

Content of Each Product Unit


Product
Casual Granite Table Deluxe Granite Table
Red Oak 12 board feet 12 board feet
Granite 6 square feet 8 square feet
Direct manufacturing labor 4 hours 6 hours
Product
Casual Granite Table Casual Granite Table
Expected sales in units 50,000 10,000
Selling price $ 600 $ 800
Target ending inventory in 11,000 500
units
Beginning inventory in units 1,000 500
Beginning inventory in dollars $384,000 $262,000
Direct Materials
Red Oak Granite
Beginning inventory 70,000 b.f. 60,000 sq. ft.
Target ending inventory 80,000 b.f. 20,000 sq. f

Required: Based on the above data prepare

A. Revenue Budget
B. Production Budget
C. Prepare the Direct Material Usage Budget and Direct Material Purchases Budget.
D. Prepare the Direct Manufacturing Labor Costs Budget
E. Prepare the Manufacturing Overhead Costs Budget

Solution
a) Revenue budget
Units Selling price Total revenue
Casual 50,000 $ 600 $ 30,000,000
Deluxe 10,000 $ 800 $ 8,000,000
Total $ 38,000,000

b) Production Budget
  Casual Delux
Budgeted unit sales 50,000 10,000
+ Target ending finished goods inventory 11,000 500
= Total required units 61,000 10,500
- Beginning finished goods inventory 1,000 500
= Units of finished goods to be produced 60,000 10,000

Budgeted production = Budget sale + Target ending inventory – Beginning inventory

c) Prepare the Direct Material Usage Budget and Direct Material


Purchases Budget.

i) Direct material usage budget


  Red Oak Granite
Physical unit budget    

Direct material required for casual tables 720,000 bf 360,000 sf

Direct material required for delux tables 120,000 bf 80,000 sf


Total quantity of DM to be used 840,000 bf 440,000 sf
  Red Oak Granite Total
Cost budget    
Available from beginning DM inventory
(FIFO) $ 490,000 $600,000
Red oak: 70,000 b.f x $7 per b.f
Granite: 60,000 s.f x $10 per s.f
To be purchased this period
Red oak: (840,000-70,000) b.f x $7 per $ $
b.f 5,390,000 3,8000,000
Granite: (440,000-60,000) s.f x $10 per
s.f

Total quantity of DM to be used


$ 5,880,000 $ 4,400,000 $ 10,280,000

ii) Direct material purchase budget


  Red Oak Granite
Physical unit budget    
To be used in production (from Schedule 3i) 840,000 bf 440,000 sf
Target ending inventory 80,000 bf 20,000 sf
= total requirement 920,000 bf 460,000 sf
- Beginning inventory 70,000 bf 60,000 sf
= Purchase to be used 850,000 bf 400,000 sf

Cost budget    
Red oak: 850,000 b.f x $7 per b.f $ 5,950,000
Granite: 400,000 s.f x $10 per s.f $ 4,000,000
Purchases $ 5,950,000 $ 4,000,000 $ 9,950,000

d) Prepare the Direct Manufacturing Labor Costs Budget


  Output DL Total Hourly wage Total
units hours hours rate
produced per unit
           
Casual 60,000 4 240,000 $ 20 $ 4,800,000
Delux 10,000 6 60,000 $ 20 $ 1,200,000
Total     300,000   $ 6,000,000

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