Butler Corp. has forecast sales for the next four months as follows: July 14,000 units, August 16,000 units, September 17,500 units, October 18,000 units. Butler's policy is to have an ending inventory of 20% of the next month's sales needs on hand. July 1 inventory is projected to be 2,500 units. Manufacturing overhead is budgeted to be $18,000 (depreciation $2,000, supervision $7,000, factory lease $1,500, maintenance $4,000, training $3,500) plus $5 per unit produced ($3 indirect materials, $2 utilities). a. Prepare a production budget for Butler for as many months as is possible.b. Prepare a manufacturing overhead budget for the three months July through September. Be sure to include a total for the quarter as well.
What will be an ideal response?
| a. | July | August | September | October |
| Sales | 14,000 | 16,000 | 17,500 | 18,000 |
| + Ending Inv | + 3,200 | + 3,500 | + 3,600 | ? |
| - Beginning Inv | - 2,500 | - 3,200 | - 3,500 | ? |
| Production | 14,700 | 16,300 | 17,600 | ? |
| ? | ? | ? | ? | ? |
| b. | July | August | September | Total |
| Indirect materials (x $3) | $44,100 | $48,900 | $52,800 | $145,800 |
| Utilities (x $2) | 29,400 | 32,600 | 35,200 | 97,200 |
| Total variable cost | 73,500 | 81,500 | 88,000 | 243,000 |
| Depreciation | 2,000 | 2,000 | 2,000 | 6,000 |
| Supervision | 7,000 | 7,000 | 7,000 | 21,000 |
| Factory lease | 1,500 | 1,500 | 1,500 | 4,500 |
| Maintenance | 4,000 | 4,000 | 4,000 | 12,000 |
| Training | 3,500 | 3,500 | 3,500 | 10,500 |
| Total fixed cost | 18,000 | 18,000 | 18,000 | 54,000 |
| Total overhead | 91,500 | 99,500 | 106,000 | 297,000 |
Budgeted production units = Budgeted unit sales + Budgeted ending finished goods inventory - Budgeted beginning finished goods inventory. Budgeted manufacturing overhead = Budgeted production × Variable overhead cost per unit + Budgeted fixed manufacturing overhead.
Business
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