Seer, Inc Has Projected Sales of Its Product for the Next

question 81

Essay

Seer, Inc. has projected sales of its product for the next 6 months as follows:
July 120 units
August 270
September 300
October 240
November 90
December 210
The product sells for $100 per unit, variable expenses are $30 per unit, and fixed expenses are $1,500 per month. The finished product requires 3 units of raw material and 10 hours of direct labour. The company tries to maintain an ending inventory of finished goods equal to the next 2 months of sales and an ending inventory of raw materials equal to half of the current month's usage.
a)Prepare a production budget for August, September, and October.
b)Prepare a direct labour hours budget for August, September, and October
c)Give a brief explanation of the various budgets that are required by the cost of goods sold budget. Explain how these budgets are derived from the production budget. Then explain the manner in which the budgets are used in the budgeted income statement.

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Definitions:

Joint Products

Products that are produced together from the same process or raw materials but are sold as separate items.

Joint Cost Allocation

The process of assigning the costs of a production process that yields multiple products to those products in a rational and consistent manner.

Split-Off

A point in the manufacturing process where multiple products are generated from a single process or input.

Separable Processing Costs

Costs that are incurred after the split-off point where multiple products are generated from a common process and can be directly attributable to each product.