Question

Exercise 7-7 Manufacturing: Direct labor and factory overhead budgets LO P1

Addison Co. budgets production of 2,850 units during the second quarter. Other information is as follows:

Direct labor		Each finished unit requires 6 direct labor hours, at a cost of $9 per hour.
Variable overhead		Applied at the rate of $11 per direct labor hour.
Fixed overhead		Budgeted at $640,000 per quarter.

1. Prepare a direct labor budget.
2. Prepare a factory overhead budget.

Exercise 7-18 Budgeted cash receipts LO P2

Jasper Company has sales on account and for cash. Specifically, 65% of its sales are on account and 35% are for cash. Credit sales are collected in full in the month following the sale. The company forecasts sales of $515,000 for April, $525,000 for May, and $550,000 for June. The beginning balance of Accounts Receivable is $291,300 on April 1.

Prepare a schedule of budgeted cash receipts for April, May, and June.

Answer 1

Ans)

7-7)

1)

Addision company

Direct labour budget

Second quarter

Units to be produced = 2850 units

Labour requirements per unit =6 direct labour hours

Total labour hours needed = 17100 hours

Labour rate = 9 per hour

Labour dollars = 17100 X 9 = $153900

2) Factory overhead budget

Addison Co

Factory Overhead budget

Second quarter

Total labour hours needed = 17100

Variable factory overhead rate per DL hour = $11

Budgeted variable overhead = 17100 X 11 = 188100

Budgeted fixed overhead = 640,000

Budgeted total overhead = 828100

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7-18

April May June

Cash sales -- 35% 180250 183750 192500

Sales on account - 65% 334750 341250 357500

Total sales 515000 525000 550,000

JASPER COMPANY

Cash Receipts Budget

For April, May, and June

April    May June

Cash receipts from:

Cash sales   180250 183750 192500   

Collection of accounts receivable 291300   334750 341250

Total cash receipts 471550 518500 533750