6-37 Revenue and production budgets.

(CPA, adapted)
The Sabat Corporation manufactures and sells two products: Thingone and Thingtwo. In July 2016,
:
2017 Projected Sales
Product Units Price
Thingone 62,000 $172
Thingtwo 46,000 $264

2017 Inventories in Units

Expected Target
Product January 1, 2017 December 31, 2017
Thingone 21,000 26,000
Thingtwo 13,000 14,000

The following direct materials are used in the two products:

Amount Used per Unit
Direct Material Unit Thingone Thingtwo
A Pound 5 6
B Pound 3 4
C each 0 2

Projected data for 2017 for direct materials are:

Expected Inventories Target Inventories
Direct Material Anticipated Purchase Price January 1, 2017 December 31, 2017
A $11 37,000 lb. 40,000 lb.
B 6 32,000 lb. 35,000 lb.
C 5 10,000 units 12,000 units
Projected direct manufacturing labor requirements and rates for 2017 are:
Product Hours per Unit Rate per hour
Thingone 3 $11
Thingtwo 4 $14
Manufacturing overhead is allocated at the rate of $19 per direct manufacturing labor-hour.
Required:
Based on preceding projections and budget requirements for Thingone and Thingtwo, prepare the
following budgets for 2017:
1. Revenues budget (in dollars)
2. What questions might the CEO ask the marketing manager when reviewing the revenues budget?
Explain briefly.
3. Production budget (in units)
4. Direct material purchases budget (in quantities)
5. Direct material purchases budget (in dollars)
6. Direct manufacturing labor budget (in dollars)
7. Budgeted finished-goods inventory at December 31, 2017 (in dollars)
8. What questions might the CEO ask the production manager when reviewing the production, direct
materials, and direct manufacturing labor budgets?
9.