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School Days Furniture Ltd manufactures a variety of desks, chairs, tables, and bookshelves that are sold to public schools in Western Australia
School Days Furniture Ltd manufactures a variety of desks, chairs, tables, and bookshelves that are sold to public schools in Western Australia. The financial accountant of the desk division is currently preparing the budget for the third quarter of this year. The following sales have been forecast for the third quarter.
|
July |
5000 desks |
|
August |
6000 desks |
|
September |
7500 desks |
Each desk requires 3 meters of wooden planks and 1.5 hours of direct labour. Each desk sells for $ 200. Wooden planks costs $18 per metre and at the end of each month there is enough wood remaining to cover 10 per cent of the next month’s production requirements. The division incurs a cost of $25 per hour for direct labour, including on-costs. The division ends each month with enough finished goods to satisfy 20 per cent of the following month’s sales.
Required:
- In an Excel spreadsheet construct and complete the following budget schedules.
- Sales budget
|
July |
August |
September |
|
|
Sales units |
5000 |
||
|
Selling price per unit |
$ 200 |
||
|
Sales revenue |
$ 1,000,000 |
- Production budget (units)
|
July |
August |
September |
|
|
Sales unit |
5 000 |
||
|
Add ending inventory |
1 200 |
1 500 |
|
|
Total units required |
6 200 |
||
|
Less opening inventory |
1 000 |
||
|
Planned production |
5 200 |
- Raw materials purchases
|
July |
August |
September |
|
|
Planned production |
5 200 |
||
|
Raw material per unit |
3 |
||
|
Raw material required for production |
15 600 |
||
|
Add ending inventory of raw materials |
1890 |
2 700 |
|
|
Total requirements |
17 490 |
||
|
Less ending inventory of raw materials |
1 560 |
||
|
Planned purchases of raw materials in metres |
15 930 |
||
|
Cost per metre |
$ 18 |
||
|
Planned purchases of raw material in dollars |
$ 286 740 |
- Direct labour budget
|
July |
August |
September |
|
|
Sales units |
5 000 |
||
|
Direct labour per unit |
1.5 |
||
|
Direct labour hours required |
7 500 |
||
|
Cost per hour |
$ 25 |
||
|
Planned direct labour cost |
$187 500 |
Expert Solution
Direct Labor Budget is based on planned production, not on sales units
| a. Sales budget | |||
| July | August | September | |
| Sales units | 5000 | 6000 | 7500 |
| Selling price per unit | $ 200 | $ 200 | $ 200 |
| Sales revenue | $ 1,000,000 | $ 1,200,000 | $ 1,500,000 |
| a. Production budget (units) | |||
| July | August | September | |
| Sales unit | 5000 | 6000 | 7500 |
| Add ending inventory | 1200 | 1500 | 1500 |
| Total units required | 6200 | 7500 | 9000 |
| Less opening inventory | 1000 | 1200 | 1500 |
| Planned production | 5200 | 6300 | 7500 |
| a. Raw materials purchases | |||
| July | August | September | |
| Planned production | 5200 | 6300 | 7500 |
| Raw material per unit | 3 | 3 | 3 |
| Raw material required for production | 15600 | 18900 | 22500 |
| Add ending inventory of raw materials | 1890 | 2250 | 2700 |
| Total requirements | 17490 | 21150 | 25200 |
| Less ending inventory of raw materials | 1560 | 1890 | 2250 |
| Planned purchases of raw materials in metres | 15930 | 19260 | 22950 |
| Cost per metre | $ 18 | $ 18 | $ 18 |
| Planned purchases of raw material in dollars | $ 286,740 | $ 346,680 | $ 413,100 |
| a. Direct labour budget | |||
| July | August | September | |
| Planned production | 5200 | 6300 | 7500 |
| Direct labour per unit | 1.5 | 1.5 | 1.5 |
| Direct labour hours required | 7800 | 9450 | 11250 |
| Cost per hour | $ 25 | $ 25 | $ 25 |
| Planned direct labour cost | $ 195,000 | $ 236,250 | $ 281,250 |
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