Critique of Performance Report. The Kristina Company uses a fixed or fore- cast budget to measure its performance against the objectives set by the forecast and to help in controlling costs. At the end of a month, management received the report below which compares actual performance with budgeted figures:
Items of Cost
Units produced
. Actual
73,500 Budget
75,000
Direct materials
.
$37,020
$39,000
Direct labor
.
5,950
6,000
Factory supplies
.
1,550
1,500
Indirect labor
.
710
726
Repairs and maintenance
.
2,300
2,250
Insurance and taxes
.
350
355
Rent
.
2,000
2,000
Depreciation
.
2,200
2,200
Total
.
$52,080
$54,031
Required: Conclusions to be drawn from this report indicating weaknesses, if any, of this type of budget.
Q17
Sales, Materials, Labor, and Inventory Budgets. A budget department gathered the following data concerning future sales and budget requirements:
Product
Units
Price
January 1, 19–
December 31,19–
A
20,000
$55
8,000 units
10,000 units
B
50,000
50
15,000 units
15,000 units
C
30,000
80
6,000 units
6,000 units
Anticipated Sales for 19– Expected Inventories Desired Inventories
Materials used in manufacture:
Amount Used per Unit of Product
Stock No.
110
50
41
30
40
Unit
Each Each Kilograms Kilograms Meters
ABC
3 5
213
2
3
5 4
Anticipated Purchase Price for Raw Materials
ItO $3.00 each
50 2.00 each
41 2.50 per kilogram
30 4.00 per kilogram
40 3 .25 per meter
Expected Inventories
January 1, 19–
21,000 each
17,000 each
10,000 kilograms
18,000 kilograms
25,000 meters
Desired Inventories
December 31, 19–
25,000 each
23,000 each
15,000 kilograms
18,000 kilograms
30,000 meters
Labor requirements and rates (direct labor):
Product Hours per Unit
A……………… 4
B……………… 5
C……………… 5
Rate Per Hour
$4.00
3.00
4.20
Overhead is applied at the rate of $2 per direct labor hour.
Required: (1) Sales budget (in dollars). (2) Production budget (in quantities).
(3) Direct materials budget (in quantities).
(4) Direct materials purchase budget (in dollars). (5) Direct labor budget (in dollars).
(6) Finished goods inventory, December 31, 19- (in dollars).