Dear Friends,
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Scarborough Corporation manufactures and sells two products, Thingone and Thingtwo. Scarborough's budget department gathered the following data to project sales and budget requirements:
|
Projected Sales
|
|
|
|
Product
|
Units
|
Price
|
|
|
|
|
|
Thingone
|
60,000
|
$ 70
|
|
Thingtwo
|
40,000
|
100
|
|
Projected Inventories -- in units
|
|
|
|
|
Expected
|
Desired
|
|
Product
|
January 1
|
December 31
|
|
|
|
|
|
Thingone
|
20,000
|
25,000
|
|
Thingtwo
|
8,000
|
9,000
|
To produce one unit of Thingone and Thingtwo, the following raw materials are used:
|
Raw Material
|
Unit
|
Thingone
|
Thingtwo
|
|
|
|
|
|
|
A
|
lb.
|
4
|
5
|
|
B
|
lb.
|
2
|
3
|
|
C
|
each
|
0
|
1
|
Projected data for the year with respect to raw materials are as follows:
|
|
Anticipated
|
Expected
|
Desired
|
|
Raw
|
Purchase
|
Inventories
|
Inventories
|
|
Material
|
Price
|
1/1
|
12/31
|
|
|
|
|
|
|
A
|
$8
|
32,000 lb.
|
36,000 lb.
|
|
B
|
5
|
29,000 lb.
|
32,000 lb.
|
|
C
|
3
|
6,000 each
|
7,000 each
|
Projected direct labor requirements and rates are as follows:
|
Thingone -- 2 hours per unit at $3 per hour
|
|
Thingtwo -- 3 hours per unit at $4 per hour
|
Overhead is applied at the rate of $2 per direct labor hour.