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Gordon, Inc. makes toys and projects production to be 6100, 5900, 6000, and 5500 for the...

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

Solutions

Expert Solution

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Calculation of Desired Ending Inventory:
Needs Desired Ending Inventory
Q1 25% $ 95,200 $                                    23,800
Q2 25% $ 92,000 $                                    23,000
Q3 25% $ 89,000 $                                    22,250
Q4 (given) 25% $                                    25,000
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

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