Question

Direct Materials Purchases Budget: Direct Labor Budget

Crescent Company produces stuffed toy animals; one of these is “Arabeau the Cow.” Each Arabeau takes 0.20 yard of fabric (white with irregular black splotches) and 8 ounces of polyfiberfill. Fabric costs $3.40 per yard and polyfiberfill is $0.05 per ounce. Crescent has budgeted production of Arabeaus for the next four months as follows:

	Units
October	44,000
November	80,000
December	60,000
January	40,000

Inventory policy requires that sufficient fabric be in ending monthly inventory to satisfy 20 percent of the following month’s production needs and sufficient polyfiberfill be in inventory to satisfy 40 percent of the following month’s production needs. Inventory of fabric and polyfiberfill at the beginning of October equals exactly the amount needed to satisfy the inventory policy.

Each Arabeau produced requires (on average) 0.10 direct labor hour. The average cost of direct labor is $16 per hour.

Required:

1. Prepare a direct materials purchases budget of fabric for the last quarter of the year showing purchases in units and in dollars for each month and for the quarter in total. Round your answers to the nearest cent, if required.

Crescent Company
Direct Materials Purchases Budget for Fabric
For the Fourth Quarter
	October	November	December	Total
Units produced
DM per unit (yd.)
Production needs
Desired ending inventory (yd.)
Total needed
Less: Beginning inventory
DM to be purchased (yd.)
Cost per yard	$	$	$	$
Total purchase cost	$	$	$	$

2. Prepare a direct materials purchases budget of polyfiberfill for the last quarter of the year showing purchases in units and in dollars for each month and for the quarter in total. Round your answers to the nearest cent, if required.

Crescent Company
Direct Materials Purchases Budget for Polyfiberfill
For the Fourth Quarter
	October	November	December	Total
Units produced
DM per unit (oz.)
Production needs
Desired ending inventory (oz.)
Total needed
Less: Beginning inventory
DM to be purchased (oz.)
Cost per ounce	$	$	$	$
Total purchase cost	$	$	$	$

3. Prepare a direct labor budget for the last quarter of the year showing the hours needed and the direct labor cost for each month and for the quarter in total. Round your answers to the nearest cent, if required.

Crescent Company
Direct Labor Budget
For the Fourth Quarter
	October	November	December	Total
Units produced
Direct labor time per unit (hours)
Direct labor hours needed
Cost per direct labor hour	$	$	$	$
Total direct labor cost	$	$	$	$

Answer 1

Solution

Crescent Company
Direct Materials Purchases Budget for Fabric
For the Fourth Quarter
	October	November	December	Total
Units produced	44000	80000	60000	184000
DM per unit (yd.)	0.2	0.2	0.2	0.2
Production needs	8800	16000	12000	36800
Desired ending inventory (yd.)	3200	2400	1600	1600
Total needed	12000	18400	13600	38400
Less: Beginning inventory	1760	3200	2400	1760
DM to be purchased (yd.)	10240	15200	11200	36640
Cost per yard	$           3.40	$             3.40	$           3.40	$             3.40
Total purchase cost	$   34,816.00	$     51,680.00	$   38,080.00	$   124,576.00

.

Crescent Company
Direct Materials Purchases Budget for Polyfiberfill
For the Fourth Quarter
	October	November	December	Total
Units produced	44000	80000	60000	184000
DM per unit (oz.)	8	8	8	8
Production needs	352000	640000	480000	1472000
Desired ending inventory (oz.)	256000	192000	128000	128000
Total needed	608000	832000	608000	1600000
Less: Beginning inventory	140800	256000	192000	140800
DM to be purchased (oz.)	467200	576000	416000	1459200
Cost per ounce	$           0.05	$             0.05	$           0.05	$             0.05
Total purchase cost	$   23,360.00	$     28,800.00	$   20,800.00	$     72,960.00

.

Crescent Company
Direct Labor Budget
For the Fourth Quarter
	October	November	December	Total
Units produced	44000	80000	60000	184000
Direct labor time per unit (hours)	0.1	0.1	0.1	0.1
Direct labor hours needed	4400	8000	6000	18400
Cost per direct labor hour	$        16.00	$          16.00	$        16.00	$          16.00
Total direct labor cost	$ 70,400.00	$ 128,000.00	$ 96,000.00	$ 294,400.00