Durham Electric Corporation Materials and Inventory
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Part I. Budgeting
Use the following problems in answering A. and B below:
Durham Electric Corporation manufactures two different types of coils used in electric motors. In the fall of 2008 Jessica Martin, the controller, compiled the following data:
Use of raw material:
Amount Used per Unit
Raw Material Light Coil Heavy Coil
Sheet metal 4 lb. 5 lb.
Copper wire 2 lb. 3 lb.
Platform I unit
Raw material prices and inventory levels:
Anticipated Expected Desired
Purchase Inventories Inventories
Raw Material Price Jan. 1, 2009 Dec. 31, 2008
Sheet metal $8 32,000 lb. 36,000 lb.
Copper wire $5 29,000 lb. 32,000 lb.
Platform $3 6,000 lb. 7,000 lb.
Direct Labor requirements and rates:
Hours per unit Rate per hour
Product
Light coil 2 $15
Heavy coil 3 $20
Overhead is applied at the rate of $2 per direct labor hour.
Finished goods inventory (in units):
Expected Desired
Jan. 1, 2009 Dec. 31, 2008
Product
Light coil 20,000 25,000
Heavy coil 8,000 9,000
Sales forecast for 2009:
Units Price
Product
Light coil 60,000 $ 70
Heavy coil 40,000 $100
A. Sales (15 points)
Required:
Prepare a sales budget in units and dollars for the company for the coming year.
B. Purchases and Production Budgets
Required:
1. Prepare a production budget for the coming year.
2. Prepare a purchases budget in pounds and dollars for the coming year.
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Solution Summary
This solution discusses production and purchases budget.
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