Budgeting (group project) must complete an annual sales budget for

 

Arrowdale Manufacturing

 

Budget Information

 

Arrowdale Manufacturing is a family owned business that has been in operation for over 50 years.  Although the actual manufacturing process has greatly changed due to huge advances in technology, the chief product produced by Arrowdale remains the same ─ a high-quality stainless steel thermos bottle that is popular with construction workers and others needing a product with a high level of durability. The company is considering opening a second shift and hiring a number of new employees. Before this decision is finalized, the board of directors would like to have a sense of what they can expect in terms of sales for the upcoming year. In preparation for the next board meeting, you, as the group of managers over sales, have been asked to prepare an annual sales budget, a production budget, a direct materials budget, a direct labor budget, and a budgeted income statement for next year. Your group must be able to answer questions that board members might have concerning your calculations and how they impact the decision making. Your assistants have provided the following data:              

 

Sales budget

 

   Anticipated volume in units

       600,000

   Unit selling price

 $22.50

Production budget

 

   Desired ending inventory

         40,000

   Beginning inventory

         35,000

Direct materials budget

 

   Direct materials per unit (pounds)

2.5

   Desired ending direct materials in pounds

         45,000

   Beginning direct materials in pounds

         50,000

   Cost per pound (unit price)

 $3.50

Direct labor budget

 

   Direct labor hours per unit

0.5

   Direct labor cost per hour

 $12.00

Budgeted income statement

 

    Total Cost of Goods Manufactured per unit

 $18.00

    Selling expenses

       660,000

    Administrative expenses

       540,000

    Interest expense

           5,000

    Income tax rate

30%

Balance sheet – current year

 

    Finished goods inventory

         25,000

Budgeted balance sheet – next year

 

    Finished goods inventory

 20,000

 

 

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