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The budget director of Silver Rock, Inc., has gathered the following data for use in developing budgets for May:

a. Estimated sales for May: Product #1 - 1,500 units at $50 per unit Product #2 - 7,500 units at $180 per unit

b. Estimated inventories at May 1: Direct materials: Plastic 100 lbs. Lining 80 lbs. Finished products: Product #1 - 50 units at $30 per unit Product #2 - 250 units at $80 per unit

c. Desired inventories at May 31: Direct materials: Plastic 60 lbs. Lining 70 lbs. Finished products: Product #1 - 60 units at $30 per unit Product #2 - 240 units at $82 per unit

d. Direct materials used in production: In manufacture of product #1: Plastic 1.2 lbs. per unit of product Lining 0.5 lb. per unit of product In manufacture of product #2: Plastic 3.5 lbs. per unit of product Lining 1.5 lbs. per unit of product

e. Anticipated cost of purchases and beginning and ending inventory of direct materials: Plastic $6.50 per lb. Lining $4.50 per lb.

f. Direct labor requirements: Product #1: Fabrication Department 0.2 hr. at $22 per hr. Finishing Department 0.5 hr. at $15 per hr. Product #2: Fabrication Department 0.5 hr. at $22 per hr. Finishing Department 1.8 hrs. at $15 per hr.

g. Estimated factory overhead costs for May:

Indirect factory wages	$90,000
Depreciation of plant and equipment	15,000
Power and light	6,000
Insurance and property tax	4,300

h. Estimated operating expenses for May:

Sales salaries expense		$200,000
Advertising expense		87,000
Office salaries expense		35,000
Depreciation expenseoffice equipment		4,000
Telephone expenseselling		6,000
Telephone expenseadministrative		1,200
Travel expenseselling		10,000
Office supplies expense		1,000
Miscellaneous administrative expense		500

i. Estimated other revenue and expense for May:

Interest revenue	$1,940
Interest expense	2,500

j. Estimated tax rate: 22%

Answer the following questions (show all work and circle final answers).

1. Compute the sales estimate for May.
2. Compute the production needs for May.
3. Compute the direct materials that need to be purchased.
4. Compute the direct labor cost for May.
5. Compute the factory overhead for May.
6. Compute the Cost of Goods Sold for May (beginning WIP = $17,500 and ending WIP = $16,300.
7. Compute Selling and Administrative Expenses for May.
8. Compute Net Income for May.
9. Based on your answers, how would you use this information for the month of May? Explain.

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