Accounting - Budgets

1. SALES AND PRODUCTION BUDGET

Chong Ltd expects sales in 2014 of 440,000 units of serving tray. Chong ltds beginning inventory for 2014 is 33,000 trays, target ending inventory, 55,000 trays. Compute the number of trays budgeted for production in 2014 .

2. DIRECT MATERIAL BUDGET

Dog trap Ltd produces wine. The company expects to produce 2500,000 two litre bottles of merlot in 2014. Dog trap purchases empty glass bottles from an outside vendor. Its target ending inventory of such bottles is 88,000, its beginning inventory is 50,000. For simplicity, ignore breakage. Compute the number of bottles to be purchased in 2014.

3. REVENUE, PRODUCTION AND PURCHASES BUDGETS

Kawasaki ltd has a division that manufactures two wheel motorcycles. Its budgeted sales for Model G in 2014 are 450,000 units. Kawasakis target ending inventory is 40,000 units and its beginning inventory is 50,000 units. The companys budgeted selling price to its distributors and dealers is 4,000 per motorcycle.

Kawasaki buys all its wheels form an outside supplier. No defective wheels are accepted. (Kawasakis needs for extra wheels for replacement parts are ordered by a separate division of the company.) The companys target ending inventory is 30,000 wheels and its beginning inventory is 25,000 wheels. The budgeted purchase price is $160 per wheel.

Required:

1. Compute the budgeted revenues in dollars

2. Compute the number of motorcycles to be produced.

3. Compute the budgeted purchases of wheels in units and in dollars.

4. BUDGETS FOR PRODUCTION AND DIRECT MANUFACTURING LABOUR.

Zhan Manufacturing makes and sells artistic frames for photographs for weddings, graduations and other special events. Trevor Robinson, the financial controller, is responsible for preparing Zhan manufacturing’s master budget and has accumulated the following information for 2014.

			2014
	Jan	Feb	Mar	Apr	May
Estimated sales in units	10,000	12,000	8,000	9,000	9,000
Selling price	$54.00	$51.50	$51.50	$51.50	$51.50
Direct Manufacturing labour-hours per unit	2.0	2.0	1.5	1.5	1.5
Wage per direct manufacturing labour hour	$10.00	$10.00	$10.00	$11.00	$11.00

In addition to wages, direct manufacturing labour related costs include pension contributions of $0.50 per hour, workers compensation insurance of $0.15 per hour, employee medical insurance of $0.40 per hour, and compulsory superannuation contributions. Assume that as of 1 January 2014, the superannuation guarantee obligations are 9% of wages. The cost of employee benefits paid by Zhan Manufacturing on its employees is treated as a direct manufacturing labour cost.

Zhan Manufacturing has a labour contract that calls for a wage increase to $11 per hour on 1 April 2014. New labour saving machinery has been installed and will be fully operational by 1 march 2015. Zhan Manufacturing expects to have 16,000 frames on hand at 31 December 2014, and it has a policy of carrying an end of month inventory of 100% of the following month’s sales plus 50% of the second following month’s sales.

Required:

Prepare a production budget and a direct manufacturing labour budget for Zhan Manufacturing by months for the first quarter of 2014.

Both Budgets may be combined in one schedule. The direct manufacturing labour budget should include labour-hours and show the details of each labour cost category.