# Constructing the Production BudgetThis table outlines the framework for developing a production budget across various time periods. The budget is segmented into years and quarters to provide a clear overview of production needs over time.## Table Structure### Columns:- **Year 2 Quarter**: Lists quarters 1 through 4 for Year 2, and aggregates the data for the entire year.- **Year 3 Quarter**: Includes quarters 1 and 2.### Rows:1. **Budgeted Unit Sales**: The expected sales volume for each period. These figures are essential for determining production needs.2. **Add Desired Finished Goods Inventory**: The amount of finished goods inventory desired at the end of each period to meet future sales without interruption.3. **Total Needs**: The sum of budgeted unit sales and desired finished goods inventory, representing the total units required for each period.4. **Less Beginning Inventory**: The inventory already available at the start of each period, which will reduce the production requirements.5. **Required Production**: The total production necessary to meet both sales and inventory needs, calculated by subtracting the beginning inventory from total needs.### Purpose:This detailed structure is used by businesses to ensure that they can meet sales demands and maintain appropriate inventory levels, while also optimizing production resources. Filling in the cells with actual numeric data allows for effective planning and resource allocation. **Budgeted Unit Sales and Financial Projections****Sales Data:**- **Year 2 Quarter:** - Q1: 40,000 units - Q2: 60,000 units - Q3: 100,000 units - Q4: 50,000 units- **Year 3 Quarter:** - Q1: 70,000 units - Q2: 80,000 units**Price and Receivables:**- Selling price per unit: $12- Accounts receivable, beginning balance: $65,000- Sales collected in the same quarter: 75%- Sales collected in the following quarter: 25%**Inventory Management:**- Desired ending finished goods inventory: 30% of the next quarter's budgeted unit sales- Beginning finished goods inventory: 12,000 units- Raw materials needed per unit: 5 pounds- Desired ending inventory of raw materials: 10% of next quarter's production needs- Beginning raw materials inventory: 23,000 pounds**Cost and Payment Details:**- Raw material costs: $0.80 per pound- Payment for raw materials: - 60% in the purchase quarter - 40% in the following quarter- Accounts payable for raw materials, beginning balance: $81,500**Labor and Overheads:**- Direct labor cost: $15 per hour- Direct labor hour per unit: 0.2 hours- Variable manufacturing overhead (MOH) rate: $2 per hour- Total fixed MOH: $60,000**Selling, Administrative, and Financials:**- Variable S&A expense rate: $1.80 per unit- Minimum cash balance: $50,000- Annual interest rate: 12%This data is crucial for understanding and planning production, sales, and financial strategies over the specified quarters.

The production required for a month is equal to the sales expected in the month plus any closing…

Year 2 Quarter Year 3 Quarter 1 70,000 Data 1 3 4 2 Budgeted unit sales 40,000 60,000 100,000 50,000 80,000 • Selling price per unit • Accounts receivable, beginning balance • Sales collected in the quarter sales are made • Sales collected in the quarter after sales are made • Desired ending finished goods inventory is • Finished goods inventory, beginning • Raw materials required to produce one unit • Desired ending inventory of raw materials is • Raw materials inventory, beginning • Raw material costs • Raw materials purchases are paid and • Accounts payable for raw materials, beginning balance $12 per unit $65,000 75% 25% 30% of the budgeted unit sales of the next quarter 12,000 units 5 pounds 10% of the next quarter's production needs 23,000 pounds $0.80 per pound 60% in the quarter the purchases are made 40% in the quarter following purchase $81,500 $15 per hour 0.2 hour per unit •Direct labor cost per hour •Direct labor hour per unit •Variable MOH rate •Total fixed MOH $2 per hour $60,000 •Variable S&A expense rate $1.80 per unit $50,000 12% •Minimum cash balance •Annual Interest rate

Year 2 Quarter Year 3 Quarter 1 70,000 Data 1 3 4 2 Budgeted unit sales 40,000 60,000 100,000 50,000 80,000 • Selling price per unit • Accounts receivable, beginning balance • Sales collected in the quarter sales are made • Sales collected in the quarter after sales are made • Desired ending finished goods inventory is • Finished goods inventory, beginning • Raw materials required to produce one unit • Desired ending inventory of raw materials is • Raw materials inventory, beginning • Raw material costs • Raw materials purchases are paid and • Accounts payable for raw materials, beginning balance $12 per unit $65,000 75% 25% 30% of the budgeted unit sales of the next quarter 12,000 units 5 pounds 10% of the next quarter's production needs 23,000 pounds $0.80 per pound 60% in the quarter the purchases are made 40% in the quarter following purchase $81,500 $15 per hour 0.2 hour per unit •Direct labor cost per hour •Direct labor hour per unit •Variable MOH rate •Total fixed MOH $2 per hour $60,000 •Variable S&A expense rate $1.80 per unit $50,000 12% •Minimum cash balance •Annual Interest rate

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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