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sales,direct material, direct labour and production budgets

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LaRussa Inc. is preparing its annual budgets for the year ending December 31, 2011. Accounting assistants furnish the data shown below.

Product Product
JB 50 JB 60
Sales budget:
Anticipated volume in units 400,000 200,000
Unit selling price $20 $25
Production budget:
Desired ending finished goods units 25,000 15,000
Beginning finished goods units 30,000 10,000
Direct materials budget:
Direct materials per unit (pounds) 2 3
Desired ending direct materials pounds 30,000 15,000
Beginning direct materials pounds 40,000 10,000
Cost per pound $3 $4
Direct labor budget:
Direct labor time per unit 0.4 0.6
Direct labor rate per hour $12 $12
Budgeted income statement:
Total unit cost $12 $21

An accounting assistant has prepared the detailed manufacturing overhead budget and the selling and administrative expense budget. The latter shows selling expense of $660,000 for product JB50 and $360,000 for JB 60 , and administrative expense of $540,000 for product JB 50 and $340,000 for product JB 60. Income taxes are expected to be 30%.

Instructions
Prepare the following budgets for the year. Show data for each product. Quarterly budgets should not be prepared.
(a)Sales
(b)Production
(c)Direct materials
(d)Direct labor
(e)Income statement (Note: Income taxes are not allocated to the products.)

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Solution Summary

The solution contains the preparation of sales, direct materials,direct labour and production budgets and also preparation of budgeted income statement.

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The budget director of Royal Furniture Company requests estimates of sales, production and other operating data from various administrative units every month. Selected information concerning sales and production for July 2006 is summarized as follows: (See attachment)
a) Estimated sales of King and Prince chairs for July by sales territory:
b) Estimated inventories at July 1:
c) Desired inventories at July 31:
d) Direct materials used in production:
e) Anticipated purchase price for direct materials:
f) Direct labor requirements:

Instructions:
1) Prepare a sales budget for July.
2) Prepare a production budget for July.
3) Prepare a direct materials budget for July.
4) Prepare a direct labor cost budget for July.

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