Gerrad Manufacturing has projected sales of its product for the next six months as follows: January 300 units February 700 units March 1,000 units April 900 units May 400 units June 300 units

Gerrad Manufacturing

has projected sales of its product for the next six months as follows:

January 300 units

February 700 units

March 1,000 units

April 900 units

May 400 units

June 300 units

Th e fi nished product requires 3 pounds of raw material and 10 hours of direct labor.

Gerrad tries to maintain a Finished Goods ending inventory equal to the next two

months of sales and a Raw Material ending inventory equal to one-half of the current

month’s production needs. January’s beginning inventories are expected to conform to

company policy.

a. Prepare a production budget for February, March, and April.

b. Prepare a forecast of the units and cost of raw material that will be required for

February, March, and April. Th e expected cost per pound of raw material is expected

to be $2 in February, $2.30 in March, and $2.40 in April.

c. Prepare a direct labor budget (assuming a $12 per hour rate) for February, March,

and April.

1. Prepare a Production Budget for February, March, and April; include a totals column for the period.

2. Prepare a forecast (Purchases Budget) of the units and cost of raw material that will be required for February, March, and April; include a totals column for the period.

3. Prepare a Direct Labor Budget for February, March, and April; include a totals column for the period.

4. All schedules should be in Excel and in a format appropriate for presentation to management.

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