Chapter 20: 20-14QS (page 914)
Miami Solar budgets production of 5,000 solar panels in July. Each unit requires 4 hours of direct labor at a rate of $16 per hour. Prepare a direct labor budget for July.
The budgeted cost of direct labor for the month of July will be$320,000.
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Question: Merline Manufacturing makes its product for \(75 per unit and sells it for \)150 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows.
Management expects December’s results to be repeated in January, February, and March of 2018 without any changes in strategy. Management, however, has an alternative plan. It believes that unit sales will increase at a rate of 10% each month for the next three months (beginning with January) if the item’s selling price is reduced to \(125 per unit and advertising expenses are increased by 15% and remain at that level for all three months. The cost of its product will remain at \)75 per unit, the sales staff will continue to earn a 10% commission, and the remaining expenses will stay the same.
Required
Analysis Component
For each of the following items 1 through 6, indicate yes if it describes a potential benefit of budgeting or no if it describes a potential negative outcome of budgeting.
5. Budgets can lead to excessive pressure to meet budgeted results
Activity-based budgeting is a budget system based on expected activities.
(2) How does activity-based budgeting differ from traditional budgeting?
Grace manufactures and sells miniature digital cameras for $250 each. 1,000 units were sold in May, and management forecasts 4% growth in unit sales each month.
Determine: (b) the dollar amount of camera sales for the month of June.
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