Question

Ornamental Sculptures Mfg. manufactures garden sculptures. Each sculpture requires 8 pounds of direct materials at a cost of $3 per pound and 0.4 direct labor hours at a rate of $14 per hour. Variable manufacturing overhead is charged at a rate of $3 per direct labor hour. Fixed manufacturing overhead is $3,300 per month. The company’s policy is to maintain direct materials inventory equal to 20% of the next month’s materials requirement. At the end of February the company had 4,680 pounds of direct materials in inventory. The company’s production budget reports the following.

Production Budget	March		April		May
Units to be produced	4,300		4,900		5,600

(1) Prepare direct materials budgets for March and April.
(2) Prepare direct labor budgets for March and April.
(3) Prepare factory overhead budgets for March and April.

Answer 1

1) Direct material budget

	March	April
Production Unit	4300	4900
Pound per unit	8	8
Unit to be produced	34400	39200
Add: Desired ending inventory	7840	8960
Total	42240	48160
Less: Beginning inventory	-4680	-7840
Raw material purchase	37560	40320
Cost per pound	3	3
Direct material purchase cost	112680	120960

2) Direct labor cost

	March	April
Unit to be produced	4300	4900
Labor hour per unit	0.4	0.4
Production labor hour	1720	1960
rate per hour	14	14
Direct labor cost	24080	27440

3) Factory overhead budget

	March	April
Production labor hour	1720	1960
Variable Mfg overhead per hour	3	3
Variable manufacturing overhead	5160	5880
Fixed manufacturing overhead	3300	3300
Total factory overhead	8460	9180