Question

Required information

Use the following information for the Exercises below.

Ramos Co. provides the following sales forecast and production budget for the next four months:

	April		May		June		July
Sales (units)	670		750		700		770
Budgeted production (units)	610		740		710		710

The company plans for finished goods inventory of 290 units at the end of June. In addition, each finished unit requires 5 pounds of direct materials and the company wants to end each month with direct materials inventory equal to 20% of next month’s production needs. Beginning direct materials inventory for April was 610 pounds. Direct materials cost $2 per pound. Each finished unit requires 0.50 hours of direct labor at the rate of $16 per hour. The company budgets variable overhead at the rate of $20 per direct labor hour and budgets fixed overhead of $9,700 per month.

Exercise 22-9 Manufacturing: Direct labor and factory overhead budgets LO P1

1. Prepare a direct labor budget.
2. Prepare a factory overhead budget for April, May, and June.
Complete this question by entering your answers in the tabs below.

Required 1

Prepare a direct labor budget. (Enter your direct labor hours (hrs.) per unit in two decimal places.)

	RAMOS CO. Direct Labor Budget For April, May, and June April May June Budgeted production (units) 610 740 710 units Total labor hours needed Budgeted direct labor cost

Prepare a factory overhead budget for April, May, and June.

	RAMOS CO. Factory Overhead Budget For April, May, and June April May June Total labor hours needed Budgeted variable overhead Budgeted fixed overhead Total budgeted factory overhead

Answer 1

• Requirement 1

	RAMOS CO.
	Direct Labor Budget
	For April, May, and June
		April	May	June
A	Budgeted production (units)	610	740	710	units
B	Direct labor hours per unit	0.5	0.5	0.5	direct labor hours
C = A x B	Total labor hours needed	305	370	355	direct labor hours
D	Direct labor cost per direct labor hour	$              16.00	$             16.00	$             16.00
E = C x D	Budgeted direct labor cost	$             4,880.00	$            5,920.00	$            5,680.00

• Requirement 2

	RAMOS CO.
	Factory Overhead Budget
	For April, May, and June
		April	May	June
A	Total labor hours needed	305	370	355
B	Variable Overhead per direct labor hour	$              20.00	$             20.00	$             20.00
C = A x B	Budgeted variable overhead	$         6,100.00	$         7,400.00	$        7,100.00
D	Budgeted fixed overhead	$        9,700.00	$         9,700.00	$        9,700.00
E = C + D	Total budgeted factory overhead	$        15,800.00	$       17,100.00	$       16,800.00