Collins Company is preparing its master budget for April. Use the given estimates to determine the amounts necessary for each of the following requirements. (Estimates may be related to more than one requirement.)

a. What should total sales revenue be if territories A and B estimate sales of 10,000 and 12,000 units, respectively, and the unit selling price is $40?

b. If the beginning finished goods inventory is an estimated 2,000 units and the desired ending inventory is 3,000 units, how many units should be produced?

c. What dollar amount of material should be purchased at $4 per pound if each unit of product requires 3 pounds and beginning and ending materials inventories should be 5,000 and 4,000 pounds, respectively?

d. How much direct labor cost should be incurred if each unit produced requires 1.5 hours at an hourly rate of $13?

e. How much manufacturing overhead should be incurred if fixed manufacturing overhead is $50,000 and variable manufacturing overhead is $2.50 per direct labor hour?

a. $880,000

b. 23,000

c. $272,000

d. $448,500

e. $136,250

Explanation:

a. Sales :  

Territories A (10,000 × $40)                  $400,000

Add:Territories B (12,000 × $40)          $480,000

Sales revenue                                         $880,000

b. Ending inventory                           3,000

Add: Sale of unit (10,000 + 12,000)  22,000

Less: Beginning inventory                   (2,000)

Unit produced                                         23,000

c. Unit produced                                   23,000

Introduced Material (23,000 × 3)           69,000

Add: Material in ending                           4,000  

Less: Material in beginning                     (5,000)

Purchased material a                           68,000

Pound per rate b                                       $4

Material purchased in dollar (a × b)    $272,000

d. Produced units a                                  23,000

Unit per hour b                                         1.5

Total hour (c = a × b)                               34,500

Hour per rate d                                        $13

Direct labor cost (c × d)                           $448,500

e. Total hours a                                   34,500

Variable overhead rate per hour b        $2.50

Add: Variable overhead (a × b)           $86,250

Add: Fixed overhead                               $50,000

Total manufacturing overhead           $136,250

answer; i believe the correct answer is (a) purchase of treasury stock;

there was no passage listed but using the process of elimination i'd say it was d. the high economy would do the opposite. i don't see how low prices would affect it. high unemployment is possible but i feel d is the better answer.