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Dear OTA,

Revenue and production budgets.
The Scarborough Corporation manufactures and sells two products: Thingone and Thingtwo.

Data Input Section: Scarborough Corporation
Thingone Thingtwo
Projected sales for 2007 60,000 40,000
Projected selling price \$165 \$250
Inventories in units:
Expected, January 1, 2007 20,000 8,000
Target, December 31, 2007 25,000 9,000
Direct materials needed to produce 1 unit:
Direct materials Unit
A Pounds 4 5
B Pounds 2 3
C Each 0 1

Projected data for 2006 with respect to direct materials:

Direct materials Purchase price Expected inventories Jan. 1, 2007 Target inventories Dec. 31, 2007
A \$12.00 32,000 36,000
B 5.00 29,000 32,000
C 3.00 6,000 7,000

Thingone Thingtwo
Direct labor-hours, projected 2 3
Rates per hour \$12.00 \$16.00
Overhead per direct labor hour (DLH) \$20.00 \$20.00

Thanks

Manufacturing overhead is allocated at the rate of \$20 per direct manufacturing labor-hour.
Based on the preceding projections and budget requirements for thingone and thingtwo, prepare the following budgets for 2007:

1. Production budget (in units)
2. Direct manufacturing purchases budget (in quantities)
3. Direct material purchases budget (in dollars)
4. Direct manufacuring labor budget (in dollars)
5. Budgeted finished goods inventory at December 31, 2007.

Solution Preview

Revenue and production budgets.
The Scarborough Corporation manufactures and sells two products: Thingone and Thingtwo.

Data Input Section: Scarborough Corporation
Thingone Thingtwo
Projected sales for 2007 60,000 40,000
Projected selling price \$165 \$250
Inventories in units:
Expected, January 1, 2007 20,000 8,000
Target, December 31, 2007 25,000 9,000
Direct materials needed to produce 1 unit:
Direct materials Unit
A Pounds 4 5
B Pounds 2 3
C Each 0 1

Projected data for 2006 with respect to direct materials:

Direct materials Purchase price Expected inventories Jan. 1, 2007 Target inventories Dec. 31, 2007
A \$12.00 32,000 36,000
B 5.00 29,000 32,000
C 3.00 6,000 7,000

Thingone Thingtwo
Direct labor-hours, projected 2 3
Rates per hour \$12.00 \$16.00
Overhead per direct labor hour (DLH) \$20.00 \$20.00

Manufacturing overhead is allocated at the rate of \$20 per direct manufacturing ...

Solution Summary

The solution explains how to prepare the following budgets - Production budget (in units), Direct manufacturing purchases budget (in units) , Direct material purchases budget (in dollars) and Direct manufacuring labor budget (in dollars)

\$2.49