budgeting for sales production direct materials direct labor and manufacturing overh 1571453

Budgeting for Sales, Production, Direct Materials, Direct Labor, and Manufacturing Overhead; Ethical Issues. Sanders Swimwear, Inc., produces swimsuits. The following information is to be used for the operating budget this coming year.

o Average sales price for each swimsuit is estimated to be $50. Unit sales for this coming year ending December 31 are expected to be as follows:

a. Finished goods inventory is maintained at a level equal to 10 percent of the next quarter’s sales. Finished goods inventory at the end of the fourth quarter budget period is estimated to be 400 units.

b. Each unit of product requires 3 yards of direct materials, at a cost of $4 per yard. Management prefers to maintain ending raw materials inventory equal to 20 percent of next quarter’s materials needed in production. Raw materials inventory at the end of the fourth quarter budget period is estimated to be 9,500 yards.

c. Each unit of product requires 0.5 direct labor hours at a cost of $12 per hour.

d. Variable manufacturing overhead costs are