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Jones Mining Company plans to sell 120,000 units of a certain product line at a price of $6. There are 10,000 units of the product in the inventory at January 1 and the inventory is to be increased 20% during the year.
Two types of materials are used to make the product. Four units of Material A each costing 30 cents are required for each unit of product, and two units of Material B each costing 40 cents are required for each unit of product. On January 1 there are 10,000 units of Material A in inventory and 5,000 units of Material B. Plans for the year indicate that 12,000 units of Material A and 6,000 units of Material B are to be in the inventory on December 31.
Each unit of product can be produced in 15 minutes of direct labor time. Direct labor is paid at the rate of $8.00 an hour. The variable manufacturing overhead varies at the rate of $.50 per direct labor hour and the fixed manufacturing overhead for the year is estimated at $140,000.
Required:a. Prepare a production budget for the year.b. Prepare a materials purchases budget for the year.c. Prepare a labor cost budget for the year.d. Prepare a budget for manufacturing overhead for the year.
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