Chapter_24_Budget_Preparation - Material A $4.00 per lbs...

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PREPARING BUDGETS Selected information concerning sales and production for Cabot Co. for July 2006 are summarized as follows: a. Estimated sales: Product K: 40,000 units at $30.00 per unit Product L: 20,000 units at $65.00 per unit b. Estimated inventories, July 1, 2006: Material A: 4,000 lbs. Product K: 3,000 units at $17 per unit $51,000 Material B: 3,500 lbs. Product L: 2,700 units at $35 per unit $94,500 Total $145,500 There were no work in process inventories estimated for July 1, 2006. c. Desired inventories at July 31, 2006: Material A: 3,000 lbs. Product K: 2,500 units at $17 per unit $42,500 Material B: 2,500 lbs. Product L: 2,000 units at $35 per unit $70,000 Total $112,500 There were no work in process inventories estimated for July 31, 2006. d. Direct materials used in production: Product K Product L Material A: 0.7 lbs. per unit 3.5 lbs. per unit Material B: 1.2 lbs. per unit 1.8 lbs. per unit e. Unit costs for direct materials:
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Unformatted text preview: Material A: $4.00 per lbs. Material B: $2.00 per lbs. f. Direct labor requirements: Department 1 Department 2 Product K 0.4 hour per unit 0.15 hour per unit Product L 0.6 hour per unit 0.25 hour per unit 1 g. Department 1 Department 2 Direct labor rate $12.00 per hour $16.00 per hour g. Estimated factory overhead costs for July: Indirect factory wages $200,000 Depreciation of plant and equipment $40,000 Power and light $25,000 Indirect materials $34,000 Total $299,000 INSTRUCTIONS: 1. Prepare a sales budget for July. 2. Prepare a production budget for July. 3. Prepare a direct materials purchases budget for July. 4. Prepare a direct labor cost budget for July. 5. Prepare a cost of goods sold budget for July. Source: Warren, Reeve, Fess. Financial & Managerial Accounting . 8 th Edition. Thomson South-Western. 2005. pp. 854-855. 2...
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