Two products are manufactured by the Fraser Corporation: Widgets and Thingamajigs. In July 2015, the controller of Fraser, upon instructions from senior management, had the budgeting department gather the following data in order to prepare budgets for 2016:
2016 Projected Sales
Product Units Price
Widget……………...60
,000………..$198
Thingamajig………...40,000………..$300
2016 Inventories in Units
Product Expected January 1, 2016 Target December 31, 2016
Widget……………………….22,000………………………………..27,000
Thingamajig………………….10,000………………………………..11,000
The following direct materials are used to produce one unit of Widget and Thingamajig:
Amount Used per Unit
Direct Material Unit Widget Thingamajig
A………………….Kilograms…………4…………………5
B………………….Kilograms…………2…………………3
C………………………..Each…………0…………………1
Projected data for 2016 with respect to direct materials are as follows:
Anticipated Expected Target
Purchase Price Inventories, Inventories,
Direct Material January 1, 2016 December 31, 2016
A………………………….$14……………..32,000 kilograms……..36,000 kilograms
B…………………………..$ 7……………..29,000 kilograms……..32,000 kilograms
C…………………………..$ 5……………………6,000 units……………7,000 units
Projected direct manufacturing labour requirements and rates for 2016 are as follows:
Hours per Rate per
Product Unit Hour
Widget………..2…………….$15
Thingamajig…..3……………...19
Manufacturing overhead is allocated at the rate of $24 per direct manufacturing labour-hour.
Required
Based on the preceding projections and budget requirements for Widgets and Thingamajigs, prepare the following budgets for 2016:
1. Revenue budget (in dollars).
2. Production budget (in units).
3. Direct materials purchases budget (in quantities).