Chapter 20: 31QS1 (page 916)
Activity-based budgeting is a budget system based on expected activities.
Thebudgetis used tomanagethe organization'stotal funds to reduce costs.
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The production budget for Manner Company shows units to be produced as follows: July, 620; August, 680; and September, 540. Each unit produced requires two hours of direct labor. The direct labor rate is currently \(20 per hour but is predicted to be \)21 per hour in September. Prepare a direct labor budget for the months July, August, and September.
Electro Company manufactures an innovative automobile transmission for electric cars. Management predicts that ending finished goods inventory for the first quarter will be 90,000 units. The following unit sales of the transmissions are expected during the rest of the year: second quarter, 450,000 units; third quarter, 525,000 units; and fourth quarter, 475,000 units. Company policy calls for the ending finished goods inventory of a quarter to equal 20% of the next quarter’s budgeted sales. Prepare a production budget for both the second and third quarters that shows the number of transmissions to manufacture.
X-Tel budgets sales of \(60,000 for April, \)100,000 for May, and \(80,000 for June. In addition, sales are 40% cash and 60% on credit. All credit sales are collected in the month following the sale. The April 1 balance in accounts receivable is \)15,000. Prepare a schedule of budgeted cash receipts for April, May, and June.
Atlantic Surf manufactures surfboards. The company’s sales budget for the next three months is shown below. In addition, company policy is to maintain finished goods inventory equal (in units) to 40% of the next month’s unit sales. As of June 30, the company has 1,600 finished surfboards in inventory, which complies with the policy. Prepare a production budget for the months of July and August.
Miami Solar manufactures solar panels for industrial use. The company budgets production of 5,000 units (solar panels) in July and 5,300 units in August. Each unit requires 3 pounds of direct materials, which cost $6 per pound. The company’s policy is to maintain direct materials inventory equal to 30% of the next month’s direct materials requirement. As of June 30, the company has 4,500 pounds of direct materials in inventory, which complies with the policy.
Prepare a direct materials budget for July
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