Condor Corporation Case Study: Budget Creation

Condor Corporation manufactures two different types of coils used in electric motors. In the fall of the
current year, the controller compiled the following data.

- Sales forecast for 20x3 (all units to be shipped in 20x3):
Product Units Price
Light coil .................................................................................................................... 60,000 $130
Heavy coil .................................................................................................................. 40,000 190
â?¢ Raw-material prices and inventory levels:
Raw Material
Expected Inventories
January 1, 20x3
Desired Inventories,
December 31, 20x3
Anticipated
Purchase Price
Sheet metal ................. 32,000 lb. 36,000 lb. $16
Copper wire .................. 29,000 lb. 32,000 lb. 10
Platform ...................... 6,000 units 7,000 units 6

- 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 .................................. 1 unit

- Direct-labor requirements and rates:
Product Hours per Unit Rate per Hour
Light coil .................................... 4 $15
Heavy coil ................................... 6 20

- Finished-goods inventories (in units):
Product
Expected
January 1, 20x3
Desired
December 31, 20x3
Light coil ................................ 20,000 25,000
Heavy coil ............................... 8,000 9,000

- Manufacturing overhead:
Overhead Cost Item Activity-Based Budget Rate
Purchasing and material handling .................................. $.50 per pound of sheet metal and copper wire purchased
Depreciation, utilities and inspection .............................. $8.00 per coil produced (either type)
Shipping ....................................................................... $2.00 per coil shipped (either type)
General manufacturing overhead ................................... $6.00 per direct-labor hour

Required: Prepare the following budgets for 20x3.

1. Sales budget (in dollars).
2. Production budget (in units).
3. Raw material purchases budget (in quantities).
4. Raw material purchases budget (in dollars).
5. Direct-labor budget (in dollars).
6. Manufacturing-overhead budget (in dollars).