The Master Budget

Sales budget
Anticipated volume in units	600,000
Unit selling price	$22.50
Production budget
Desired ending inventory	40,000
Beginning inventory	35,000
Direct materials budget
Direct materials per unit (pounds)	2.5
Desired ending direct materials in pounds	45,000
Beginning direct materials in pounds	50,000
Cost per pound (unit price)	$3.50
Direct labor budget
Direct labor hours per unit	0.5
Direct labor cost per hour	$12.00
Budgeted income statement
Total Cost of Goods Manufactured per unit	$18.00
Selling expenses	660,000
Administrative expenses	540,000
Interest expense	5,000
Income tax rate	30%
Balance sheet - current year
Finished goods inventory	25,000
Budgeted balance sheet - next year
Finished goods inventory	20,000

Arrowdale Manufacturing

Budget Information

Arrowdale Manufacturing is a family owned business that has been in operation for over 50 years. Although the actual manufacturing process has greatly changed due to huge advances in technology, the chief product produced by Arrowdale remains the same ─ a high-quality stainless steel thermos bottle that is popular with construction workers and others needing a product with a high level of durability. The company is considering opening a second shift and hiring a number of new employees. Before this decision is finalized, the board of directors would like to have a sense of what they can expect in terms of sales for the upcoming year. In preparation for the next board meeting, you, as the group of managers over sales, have been asked to prepare an annual sales budget, a production budget, a direct materials budget, a direct labor budget, and a budgeted income statement for next year. Your group must be able to answer questions that board members might have concerning your calculations and how they impact the decision making. Your assistants have provided the following data:

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