Chapter 6 Solutions To Assigned Exercises Essay

2193 Words Feb 24th, 2015 9 Pages
CHAPTER 6
MASTER BUDGET AND RESPONSIBILITY ACCOUNTING
6-16

(15 min.) Sales budget, service setting.

In 2014, Rouse & Sons, a small environmental-testing firm, performed 12,200 radon tests for
$290 each and 16,400 lead tests for $240 each. Because newer homes are being built with leadfree pipes, lead-testing volume is expected to decrease by 10% next year. However, awareness of radon-related health hazards is expected to result in a 6% increase in radon-test volume each year in the near future. Jim Rouse feels that if he lowers his price for lead testing to $230 per test, he will have to face only a 7% decline in lead-test sales in 2015.
Required:
1. Prepare a 2015 sales budget for Rouse & Sons assuming that Rouse holds prices at 2014
…show more content…
SOLUTION
Roletter Company
Budget for Production and Direct Manufacturing Labor for the Quarter Ended March 31, 2015

Budgeted sales (units)
Add target ending finished goods inventorya (units)
Total requirements (units)
Deduct beginning finished goods

January
10,000

February
14,000

March
7,000

Quarter
31,000

17,500
27,500

11,000
25,000

12,000
19,000

12,000
43,000

inventory (units)
Units to be produced
Direct manufacturing labor-hours
(DMLH) per unit
Total hours of direct manufacturing labor time needed
Direct manufacturing labor costs:
Wages ($12.00 per DMLH)
Pension contributions
($0.50 per DMLH)
Workers’ compensation insurance
($0.20 per DMLH)
Employee medical insurance
($0.30 per DMLH)
Social Security tax (employer’s share)
($12.00 × 0.075 = $0.90 per DMLH)
Total direct manufacturing labor costs

17,500
10,000

17,500
7,500

11,000
8,000

17,500
25,500

× 2.0

× 2.0

× 1.5

20,000

15,000

12,000

47,000

$240,000

$180,000

$144,000

$564,000

10,000

7,500

6,000

23,500

4,000

3,000

2,400

9,400

6,000

4,500

3,600

14,100

18,000

13,500

10,800

42,300

$278,000

$208,500

$166,800

$653,300

a

100% of the first following month’s sales plus 50% of the second following month’s sales.
Note that the employee Social Security tax of 7.5% is irrelevant. Such taxes are withheld from employees’ wages and paid to the government by the employer on behalf of the

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