Sales Budget The marketing department has estimated sales as follows for the remainder of the year: (Actual sales in June were 5,000 units) July 8,000 October 8,000 August 15,000 November 6,000 September 12,000 December 10,000 The selling price of a SUPER DUPER widget is $35 and all sales are on account. Based on past experience, sales are collected in the following pattern: 40% in the month of sale 55% in month following the sale 5% are never collected (uncollectible)

Sales Budget					Total
3rd Quarter	June	July	August	September	3rd Quarter
Sales in Units	5,000	8,000	15,000	12,000	35,000
Selling Price per Unit	35	35	35	35	35
Total Sales in $	175,000	280,000	525,000	420,000	1,225,000
Cash Collections
June's Cash Collections		115,500			115,500
July's Cash Collections		112,000	154,000		266,000
August's Cash Collections			210,000	288,750	210,000
September's Cash Collections				168,000	168,000
Total Cash Collections		$ 227,500	$ 364,000	$ 456,750	$ 1,048,250

Production Budget The company maintains a finished goods inventory equal to 5% of the following month's sales. The inventory of finished goods on July 1 is as it should be.

Production Budget				Total
3rd Quarter	July	August	September	3rd Quarter
Budgeted Sales in Units	8,000	15,000	12,000	35,000
Add: Desired Ending Inventory	750	600	200	1,550
Total Needs	8,750	15,600	12,200	36,550
Less: Beginning Inventory	400	750	600	1,750
Required Production	8,350	14,850	11,600	34,800

Raw Materials Purchasing Budget Each unit of SUPER DUPER widget requires 0.8 pounds of WHAM compound. To prevent shortages, the company would like the inventory of WHAM compound on hand at the end of each month to equal 30% of the following month's production needs. The inventory on July 1 is 2,004 pounds. WHAM compound costs $5.00 per pound and the company pays for 70% of its purchases in the month of purchase; the remainder is paid in the following month. $50,400 of WHAM compound was purchased in June and 70% was paid for in June.

RM Purchasing Budget				Total
3rd Quarter	July	August	September	3rd Quarter
Required Production	8,350	14,850	11,600	34,800
RM per Unit	0.8	0.8	0.8	0.8
Production Needs	6,680	11,880	9,280	27,840
Add: Desired Ending Inventory				-
Total Needs	6,680	11,880	9,280	27,840
Less: Beginning Inventory				-
RM to be Purchased	2,004	405	203	2,612
Cost of RM per pound	5	5	5	5
Cost of RM to be Purchased	$ 10,020	$ 2,025	$ 1,015	$ 13,060
Cash Disbursements for RM				2
June's RM Purchases
July's RM Purchases
August's RM Purchases
September's RM Purchases
Total Disbursements

The next Budget is the Direct Labor Budget. Let's assume that each unit takes 0.6 DLH to make and each DLH costs $15. Let's further assume that labor is paid in the month incurred.

DL Budget				Total
3rd Quarter	July	August	September	3rd Quarter
Budgeted Production in Units	8,350	14,850	11,600	34,800
DLH per Unit	1	1	1	1
Total DLH needed	5,010	8,910	6,960	20,880
Cost per DLH	15	15	15	15
Total Direct Labor Cost	75,150	133,650	104,400	313,200

Next we will prepare our FOH budget. FOH is applied based on DLH. Estimated variable FOH is expected to be $420,000 and estimated DLH are expected to be 300,000. Fixed FOH is estimated to be $9,100 per month with $2,000 of that amount being depreciation of factory equipment and building. Like DL, assume that FOH is paid in the month incurred.

FOH Budget				Total
3rd Quarter	July	August	September	3rd Quarter
Budgeted DLH	4,410	1,512	1,728	7,650
Variable FOH rate	$ 4.20	$ 4.20	$ 4.20	$ 4.20
Total Budgeted Variable FOH	18,522	6,350	7,258	32,130
Total Budgeted Fixed FOH	27,300	9,100	9,100	45,500
Total Budgeted FOH	45,852	15,450	16,358	77,660
Less: Depreciation	(6,000)	(2,000)	(2,000)	(10,000)
Cash Needed for FOH	$ 39,852	$ 13,450	$ 14,358	$ 67,660
				2
Total FOH per Budget
Budgeted DLH this period
Predetermined FOH per DLH

Ending FG Inventory Budget
3rd Quarter	Quantity		Cost	Total
Cost Per Unit:				2
Direct Materials
Direct Labor
FOH
Unit Cost
Ending Inventory in Units
Cost Per Unit
Ending FG Inventory