Question 21.IP.1: Selected information concerning sales and production for Cab...
Selected information concerning sales and production for Cabot Co. for July 2014 are summarized as follows:
a. Estimated sales:
Product K: 40,000 units at $30 per unit
Product L: 20,000 units at $65 per unit
b. Estimated inventories, July 1, 2014:
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 \underline{\underline{\$ \ 145,500}}
There were no work in process inventories estimated for July 1, 2014.
c. Desired inventories at July 31, 2014:
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 \underline{\underline{\$ \ 112,500}}
There were no work in process inventories desired for July 31, 2014.
d. Direct materials used in production:
| Product K | Product L | |
| Material A: | 0.7 lb. 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:
Material A: $4.00 per lb.
Material B: $2.00 per lb.
f. Direct labor requirements:
| Department 1 | Department 2 | |
| Product K | 0.4 hr. per unit | 0.15 hr. per unit |
| Product L | 0.6 hr. per unit | 0.25 hr. per unit |
g.
| Department 1 | Department 2 | |
| Direct labor rate | $12.00 per hr. | $16.00 per hr. |
h. 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 \underline{\underline{\$ \ 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.
