■ Problem 9–37
Scholastic Furniture, Inc. manufactures a variety of desks, chairs, tables, and shelf units that
are sold to public school systems throughout the Midwest. The controller of the company’s
Desk Division is currently preparing a budget for the second quarter of the year. The following
sales forecast has been made by the division’s sales manager.
April ..................................................................................... 10,000 desk-and-chair sets
May ...................................................................................... 12,000 desk-and-chair sets
June ..................................................................................... 15,000 desk-and-chair sets
Each desk-and-chair set requires 10 board feet of pine planks and 1.5 hours of direct labor.
Each set sells for $50. Pine planks cost $.50 per board foot, and the division ends each month
with enough wood to cover 10 percent of the next month’s production requirements. The
division incurs a cost of $20 per hour for direct-labor wages and fringe benefits. The division
ends each month with enough finished-goods inventory to cover 20 percent of the next month’s
sales.
Required: Complete the following budget schedules.
1. Sales budget:
April May June
Sales (in sets).......................................................... 10,000
Sales price per set ................................................... ×$50
Sales revenue ......................................................... $500,000
2. Production budget (in sets):
April May June
Sales ...................................................................... 10,000
Add: Desired ending inventory .............................. 2,400 3,000
Total requirements ................................................. 12,400
Less: Projected beginning inventory ..................... 2,000
Planned production ................................................ 10,400
3. Raw-material purchases:
April May June
Planned production (sets) ....................................... 10,400
Raw material required per set (board feet) ............. ×10
Raw material required for production (board feet) 104,000
Add: Desired ending inventory of raw material, in
board feet (10% of next month’s requirement) .... 12,600 16,000
Total requirements ................................................ 116,600
Less: Projected beginning inventory of raw material,
in board feet (10% of current month’s requirement) 10,400
Planned purchases of raw material (board feet) ..... 106,200
Cost per board foot ................................................ ×$.50
Planned purchases of raw material (dollars) .......... $53,100
4. Direct Labour Budget :
April May June
Planned production (sets) ....................................... 10,400
Direct-labor hours per set ....................................... ×1.5
Direct-labor hours required .................................... 15,600
Cost per hour ......................................................... ×$20
Planned direct-labor cost ........................................ $312,000