In: Accounting
Gordon, Inc. makes toys and projects production to be 6100, 5900, 6000, and 5500 for the next four quarters. Direct materials are $8 per kit. Beginning Raw Material Inventory is $20,000 and the company desires to end each quarter with 25% of the material needed for the next two quarter's production. Direct Materials needed for production in the First Quarter of the following year is $45,000. Gordon desires a balance of $25,000 in Raw Materials Inventory at the end of the fourth quarter. Each kit requires 1.3 hours of direct labor at an average cost of $30 per hour. Each kit requires 1.25 machine hours. Manufacturing overhead is allocated using machine hours as the allocation base. Variable overhead is $50 per kit and fixed overhead is $30,000 in the first two quarters and $32,000 in the third and fourth quarter.
Prepare Gordon's direct material budget, direct labor budget, and manufacturing overhead budget for the year. Round the direct labor hours needed for production, budgeted overhead costs, and predetermind overhead allocation rate to two decimal places. Round other amounts to the nearest whole number.
Calculations for Desired Ending Inventory | ||||||||
% | Needs (total $) | Desired Ending Inventory | ||||||
1Q | x | = | ||||||
2Q | x | = | ||||||
3Q | x | = | ||||||
4Q | ||||||||
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Direct Material Budget | ||||||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Total | Q1 | |||||||||||||||||||||||||||
Budgeted kits to be produced | 6100 | 5900 | 6000 | 5500 | 23500 | |||||||||||||||||||||||||||
Direct Material cost per kit | $ 8 | $ 8 | $ 8 | $ 8 | $ 8 | |||||||||||||||||||||||||||
Direct Material cost needed for production | $ 48,800 | $ 47,200 | $ 48,000 | $ 44,000 | $ 188,000 | $ 45,000 | ||||||||||||||||||||||||||
Add: Desired Ending Inventory | 25% of Next Two Q | $ 23,800 | $ 23,000 | $ 22,250 | $ 25,000 | $ 25,000 | ||||||||||||||||||||||||||
Total Direct Material needed | $ 72,600 | $ 70,200 | $ 70,250 | $ 69,000 | $ 213,000 | |||||||||||||||||||||||||||
Less: Beginning Inventory | $ -20,000 | $ -23,800 | $ -23,000 | $ -22,250 | $ -20,000 | |||||||||||||||||||||||||||
Budgeted Purchase of Direct Material | $ 52,600 | $ 46,400 | $ 47,250 | $ 46,750 | $ 193,000 | |||||||||||||||||||||||||||
Direct Labor Budget | ||||||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Total | ||||||||||||||||||||||||||||
Budgeted kits to be produced | 6100 | 5900 | 6000 | 5500 | 23500 | |||||||||||||||||||||||||||
Direct Labor required per Kit | 1.30 | 1.30 | 1.30 | 1.30 | 1.30 | |||||||||||||||||||||||||||
Total Labor Hours Required for production | 7,930 | 7,670 | 7,800 | 7,150 | 30,550 | |||||||||||||||||||||||||||
Per Hour Cost | $ 30 | $ 30 | $ 30 | $ 30 | $ 30 | |||||||||||||||||||||||||||
Budgeted Labor Cost | $ 237,900 | $ 230,100 | $ 234,000 | $ 214,500 | $ 916,500 | |||||||||||||||||||||||||||
Manufacturing overhead Budget | ||||||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | Total | ||||||||||||||||||||||||||||
Variable Overhead | $ 50 per Kit | $ 305,000 | $ 295,000 | $ 300,000 | $ 275,000 | $1,175,000 | ||||||||||||||||||||||||||
Fixed Overhead | $ 30,000 | $ 30,000 | $ 32,000 | $ 32,000 | $ 124,000 | |||||||||||||||||||||||||||
Total Budgeted Manufacturing overheads | a | $ 335,000 | $ 325,000 | $ 332,000 | $ 307,000 | $1,299,000 | ||||||||||||||||||||||||||
Machine Hours (b) | 1.25*Production | $ 29,375 | ||||||||||||||||||||||||||||||
Predetermined Overhead Rate | a/b | $ 44.22 | per MH |