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The document provides information to prepare a production budget and direct materials budget for C. Howland Manufacturing for the month of March. It forecasts sales of 20,000 units for March and provides beginning inventory levels. It then shows the calculations to determine the production budget of 18,000 units for March and the direct materials budget detailing the amounts of materials A and B needed, totaling 37,000 gallons of A at $2 per gallon and 18,000 pounds of B at $1 per pound.

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Rasab Ahmed
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174 views7 pages

XLSX

The document provides information to prepare a production budget and direct materials budget for C. Howland Manufacturing for the month of March. It forecasts sales of 20,000 units for March and provides beginning inventory levels. It then shows the calculations to determine the production budget of 18,000 units for March and the direct materials budget detailing the amounts of materials A and B needed, totaling 37,000 gallons of A at $2 per gallon and 18,000 pounds of B at $1 per pound.

Uploaded by

Rasab Ahmed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Question:-

E7-2 Preparing production budget and direct materials budget


The sales department of C. Howland Manufacturing has forecast sales in March to be 20,000
units. Additional Information follows:
Finished goods inventory, march 1 3,000 units
Finished goods inventory required, march 3 1,000 units

Materials used in production:


Inventory March 1 Required inventory March
A (one gallon per unit) 500 gal 1,000 gal
B (one gallon per unit) 1,000 LB 1,000 LB

Prepare the following:


a.       A production budget for March in (in units)
Solution:- Computation of the Production Budget for March
P. Gillen Manufacturing Company
Production Budget
Particulars Units
Expected sales 20000
Add: Desired ending inventory of finished g 1000
Total needs 21000
Less: Beginning inventory of finished goods 3000
Units to be produced 18000

Hence the Units to be produced 18000

b.      A direct materials budget for the month (in units and dollars)
Solution:- Computation of the Direct Materials Budget for March
P. Gillen Manufacturing Company
Direct Materials Budget
Particulars Amount A Amount B
Units to be produce 18000 18000
Direct Materials (one gallon per unit and one 1 1
Total pounds needed for production 18000 18000
Add:- Direct Ending Inventory 1000 1000
Total materials required 19000 19000
Less:- Direct Begining Inventory 500 1000
Direct materials purchases 18500 18000
Cost $ 2 $ 1
Total cost of direct materials purchases $ 37,000 $ 18,000
Hence the Total cost of direct materials p $ 37,000 $ 18,000
Standard Cost
$2 per gal
$1 per LB
1. The sales department of C. Mack Manufacturing Co. has forecast sales for its single
product to be 20,000 units for June, with three-quarters of the sales expected in the East region and
one fourth in the West region.
The budgeted selling price is $25 per unit. The desired ending inventory on June 30 is 2,000 units, 
and the expected beginning inventory on June 1 is 3,000 units. Prepare the following: 

a. A sales budget for June. 

Sales Budget
for the month ending 30th June

Region Unit Sales


Volume

East region 15,000


West region 5,000
Total Revenue

b. A production budget for June.

Production Budget
for the month ending 30th June

Particulars Units

Sales 20,000
Add desired ending Inventory 2,000
Desired Total Units 22,000
Less: units of beginning Inventory (3,000)
Total production units 19,000
he East region and

30 is 2,000 units, 

Unit Selling Total


Price Sales

25 375,000
25 125,000
500,000
5. Using the following per-unit and total amounts, prepare a flexible budget at the 
14,000-, 15,000-, and 16,000-unit levels of production and sales for Celestial Products, Inc.:

Particulars 14,000
Units

Sales 1,050,000
Less Variable Expenses
Direct Material 336,000
Direct labor 105,000
Variable factory overhead 210,000
Variable selling and administrative expense 168,000
Total Variable Expenses 819,000
Contribution Margin 231,000
Less Fixed Expenses
Fixed Factory Overhead 75,000
Fixed selling and administrative expense 80,000
Net Income 76,000
ducts, Inc.:

15,000 16,000
Units Units

1,125,000 1,200,000

360,000 384,000
112,500 120,000
225,000 240,000
180,000 192,000
877,500 936,000
247,500 264,000

75,000 75,000
80,000 80,000
92,500 109,000

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