Question

Trevor Inc. manufactures model airplane kits and projects production at 150, 530, 300, and 750 kits for the next four quarters.

Manufacturing Information: Direct materials are 4 ounces of plastic per kit and the plastic costs $2 per ounce. Indirect materials are considered insignificant and are not included in the budgeting process. Beginning Raw Materials Inventory is 900 ounces, and the company desires to end each quarter with 30% of the materials needed for the next quarter's production. trevor desires a balance of 260 ounces in Raw Materials Inventory at the end of the fourth quarter. Each kit requires0.50hours of direct labor at an average cost of $30 per hour. Manufacturing overhead is allocated using direct labor hours as the allocation base. Variable overhead is $0.25 per-kit, and fixed overhead is $150 per quarter.

Prepare Trevor 's direct materials budget, direct labor budget, and manufacturing overhead budget for the year. Round the direct labor hours needed for production, budgeted overhead costs, and predetermined overhead allocation rate to two decimal places. Round other amounts to the nearest whole number.

Begin by preparing Trevor 's direct materials budget.

Trevor, Inc.
Direct Materials Budget
For the Year Ended December 31
		First	Second	Third	Fourth
		Quarter	Quarter	Quarter	Quarter	Total
Budgeted kits to be produced
Direct materials (ounces) per kit
Direct materials needed for production
Plus:	Desired direct materials in ending inventory
Total direct materials needed
Less:	Direct materials in beginning inventory
Budgeted purchases of direct materials
Direct materials cost per ounce
Budgeted cost of direct materials purchases

Prepare the direct labor budget. (Enter any hours as a decimal to two places, X.XX, and round all other amounts to the nearest whole number.)

Trevor, Inc.
Direct Labor Budget
For the Year Ended December 31
		First	Second	Third	Fourth
		Quarter	Quarter	Quarter	Quarter	Total
Budgeted kits to be produced
Direct labor hours per unit
Direct labor hours needed for production
Direct labor cost per hour
Budgeted direct labor cost

Prepare the manufacturing overhead budget. (Enter all costs and hours as a decimal to two places, X.XX. Abbreviations used: VOH = variable manufacturing overhead; FOH = fixed manufacturing overhead.)

Trevor, Inc.
Manufacturing Overhead Budget
For the Year Ended December 31
		First	Second	Third	Fourth
		Quarter	Quarter	Quarter	Quarter	Total
Budgeted kits to be produced
VOH cost per kit
Budgeted VOH
Budgeted FOH
Budgeted manufacturing overhead costs
Direct labor hours
Budgeted manufacturing overhead costs
Predetermined overhead allocation rate

Answer 1

Trevor Inc
Direct Materials, Budget
For the Year Ended December 31
		First	Second	Third	Fourth
		Quarter	Quarter	Quarter	Quarter	Total
	Budgeted Kits to be produced	150	530	300	750	1730
	Direct Materials (ounces) per kit	4	4	4	4	4
	Direct Materials needed for production	600	2120	1200	3000	6920
Add	Desired Direct Materials in Ending Inventory	636	360	900	260	260
	Total Direct Materials needed	1236	2480	2100	3260	7180
Less	Direct Materials in Beginning Inventory	900	636	360	900	900
	Budgeted purchases of direct materials	336	1844	1740	2360	6280
	Direct materials cost per ounce	2	2	2	2	2
	Budgeted cost of direct material purchases	672	3688	3480	4720	12560
Trevor, Inc.
Direct Labor Budget
For the Year Ended December 31
		First	Second	Third	Fourth
		Quarter	Quarter	Quarter	Quarter	Total
Budgeted kits to be produced		150	530	300	750	1730
Direct labor hours per unit		0.5	0.5	0.5	0.5	0.5
Direct labor hours needed for production		75	265	150	375	865
Direct labor cost per hour		30	30	30	30	30
Budgeted direct labor cost		2250	7950	4500	11250	25950
Trevor, Inc.
Manufacturing Overhead Budget
For the Year Ended December 31
		First	Second	Third	Fourth
		Quarter	Quarter	Quarter	Quarter	Total
Budgeted kits to be produced		150	530	300	750	1730
VOH cost per kit		0.25	0.25	0.25	0.25	0.25
Budgeted VOH		37.5	132.5	75	187.5	432.5
Budgeted FOH		150	150	150	150	600
Budgeted manufacturing overhead costs		187.5	282.5	225	337.5	1032.5
Direct labor hours		2250	7950	4500	11250	25950
Budgeted manufacturing overhead costs		187.5	282.5	225	337.5	1032.5
Predetermined overhead allocation rate		0.083	0.036	0.050	0.030	0.040