Question

Claire Inc. predicts sales of 4,000 frames in May & 14,000 units in June. Target end of month finished-goods inventory is 10% of next month’s sales. The company wants RM ending inventory to cover 20% of next month’s needs. The frames each require 2 pieces of trim to manufacture and each trim costs $3 per piece. The frames also require three hours of labor. The direct labor rate is $10 per hour.

Prepare a May materials usage budget for Claire Inc. if June’s budgeted production = 6,000 frames. How many pieces of trim must be purchased in May?

Prepare a May materials usage budget for Claire Inc. if June’s budgeted production = 6,000 frames. What is the total budgeted Raw Materials Cost for May?

Prepare a direct labor budget in hours and dollars for May. What is the total budgeted direct labor cost for May for Claire Inc.?

Answer 1

Solution 1:

Production Budget For May
Particulars	May
Budgeted sale units	4000
Add: Ending Inventory of Frames (14000*10%)	1400
Less: Beginning Inventpry of frames (4000*10%)	400
Production units for May	5000

May Material usage Budegt - Claire Inc.
Particulars	May
Budgeted Production units	5000
Pieces of Trim per frame	2
Estimated consumption of Trims	10000
Add: ending inventory (20% of next month production)	1200
Less: Beginning inventory (10000*20%)	2000
Budgeted purchase units of Trims in May	9200

Solution 2:

Budgeted raw Material (Trim) Cost
Budgeted purchase units of Trims in May	9200
Cost per unit of Trim	$3.00
Budgeted Raw Material Cost	$27,600.00

Solution 3:

Budgeted Direct labor budget - Claire Inc.
Particulars	January
Budgeted Production units for may (Frames)	5000
Direct labor hours per unit	3
Budgeted direct labor hours	15000
direct labor cost per hour	$10.00
Budgeted direct labor cost	$1,50,000.00