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28 April, 16:44

Ornamental Sculptures Mfg. manufactures garden sculptures. Each sculpture requires 9 pounds of direct materials at a cost of $3 per pound and 0.4 direct labor hours at a rate of $16 per hour. Variable manufacturing overhead is charged at a rate of $2 per direct labor hour. Fixed manufacturing overhead is $4, 200 per month. The company's policy is to maintain direct materials inventory equal to 30% of the next month's materials requirement. At the end of March, the company had 5, 080 pounds of direct materials in inventory.

The company's production budget reports the following.

Production Budget March April May

Units to be produced 3,400 5,400 5,200

Required:

a. Prepare direct materials budgets for March and April.

b. Prepare direct labor budgets for March and April. (Enter all "per unit" amounts to 2 decimal places.)

c. Prepare factory overhead budgets for March and April.

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Answers (1)
  1. 28 April, 19:15
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    Instructions are below.

    Explanation:

    Giving the following information:

    Production Budget

    March = 3,400

    April = 5,400

    May = 5,200

    A) Direct materials:

    Each sculpture requires 9 pounds of direct materials at a cost of $3 per pound.

    Desired ending inventory = 30% of the next month's materials requirement.

    Beginning inventory = 5,080 pounds

    Purchases = production + desired ending inventory - beginning inventory

    March (pounds)

    Production = 3,400*9 = 30,600

    Ending inventory = (5,400*9) * 0.3 = 14,580

    Beginning inventory = (5,080)

    Total pounds = 40,100

    Total cost = 40,100*3 = $120,300

    April (pounds)

    Production = 5,400*9 = 48,600

    Ending inventory = (5,200*9) * 0.3 = 14,040

    Beginning inventory = (14,580)

    Total pounds=

    Total cost = 48,060*3 = $144,180

    B) Direct labor:

    0.4 direct labor hours at a rate of $16 per hour.

    March:

    Direct labor hours = 3,400*0.4 = 1,360

    Direct labor costs = 1,360*16 = $21,760

    April:

    Direct labor hours = 5,400*0.4 = 2,160

    Direct labor costs = 2,160*16 = $34,560

    C) Manufacturing overhead:

    Variable manufacturing overhead is charged at a rate of $2 per direct labor hour. Fixed manufacturing overhead is $4, 200 per month.

    March:

    Variable overhead = 2*1,360 = $2,720

    Fixed overhead = 4,200

    Total overhead = $6,920

    April:

    Variable overhead = 2*2,160 = $4,320

    Fixed overhead = 4,200

    Total overhead = $8,520
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