Question

Preparing production and mfg. budgets

Black Diamond co produces snow skis. Each ski requlires 2 pounds of carbon fiber. Teh co. mangement predicts that 5000 skis and 6000 poiunds of carbon fiber will be ininvenotry of jun 30 of the cureent year andthat 150,000 skis will be sold during the next ( third ) quarter . A set of two skis sells for 300. Management wants to end the quarter with 3500 skis and 4000 pounds of carbon fiber in inventory. Carbon fiber can be purchasedd fo 15 per poiund. Each ski requires .5 hours of dircet labor at 20 per hour. Variable overhead is applies at the rate of 8 per direct labor hour. The company budgets fixed overheaddof 1,782,000 for quarter.

Make a direct materials budget for carbon

Answer 1

First we will require to prepare Production budget of ski ( third quarter )
Units to be sold	150000
(+) Desired ending inventory	3500
Total units required	153500
(-) Units in the beginning inventory	(5000)
Units to be produced	148500
Direct materials budget for Carbon ( third quarter )
Units of skis to be produced	148500
(x) Direct material required per unit of ski ( Pounds )	2
Total direct materials needed for production ( Pounds )	297000
(+) Desired ending direct materials inventory ( Pounds )	4000
Total direct materials required ( pounds )	301000
(-) Beginning direct materials inventory ( Pounds )	(6000)
Direct materials to be purchased	295000
(x) Cost per pound of direct material	15
Cost of direct materials to be purchased	4425000

Note : Inventory as on June 30 will be the opening inventory for third quarter

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