Question

a. How many units are estimated to be sold if Skyline, Inc., has a planned production of 880,000 units, a desired beginning inventory of 130,000 units, and a desired ending inventory of 80,000 units?

Estimated sales ____ units

b. Each unit requires direct labor of 1.80 hours. The labor rate is $11.00 per hour and next year’s direct labor budget totals $554,400. How many units are included in the production budget for next year? Do not round intermediate computation.

___ units

c. What is the amount of budgeted cash payments if purchases are budgeted for $450,000 and the beginning and ending balances of accounts payable are $94,000 and $90,000, respectively?

Cash paid $

D. The production cost for a waterproof phone case is $7 per unit and fixed costs are $28,000 per month. How much is the favorable or unfavorable variance if 5,400 units were produced for a total of $65,300? Enter the amount as positive number.

Favorable  variance $____

Answer 1

Answers:-

a) given:

planned production = 880,000 units, desired beginning inventory =130,000 units and desired ending inventory = 80,000 units

Estimated Sales = begining inventory+production - ending inventory

Estimated sales = (130000+880000)-80000

Estimated sales = 930,000 units.

b) Given :

Each unit requires direct labor of 1.80 hours. The labor rate is $11.00 per hour and next year’s direct labor budget totals $554,400.

Number of units included in the production budget of the next year = next years direct labor cost/direct labor cost per unit.

Direct labor cost per unit = direct labor hours per unit x direct labor rate per hour

Direct labor cost per unit = 1.8 x 11 = $ 19.8

applying this to the formula to calculate Number of units included in the production budget of the next year,

Number of units included in the production budget of the next year = 554400/19.8 = 28000 units

c) Given:

purchases are budgeted for $450,000 and the beginning and ending balances of accounts payable are $94,000 and $90,000

The amount of budgeted cash payments = (begining balance of accounts payable + budgeted purchases) - ending balance of accounts payable

The amount of budgeted cash payments = (94000+450000)-90000 = $ 454000.

d) Given:

Variable production cost is $7 per unit and fixed costs are $28,000 per month.

5,400 units were produced for a total cost of $65,300.

Favourable or unfavourable variance = Actual cost - budgeted cost

Actual cost = 65,300

budgeted cost = (vc per unit x number of units produced) + fixed cost = (7x5400) + 28000 = 65800

Applying this value to calculate variance,

Favourable or unfavourable variance = Actual cost - budgeted cost

Favourable or unfavourable variance = 65300 - 65800 = $ 500 favourable

here, the actual cost to produce goods is less than budgeted cost, so the variance is favourable.