Question

1) The following information is from the manufacturing budget and the budgeted financial statements of Fabor Fabrication.

  

Direct materials inventory, January 1	$	68,000
Direct materials inventory, December 31		69,000
Direct materials budgeted for use during the year		190,000
Accounts payable to suppliers of materials, January 1		50,000
Accounts payable to suppliers of materials, December 31		79,000

a. Compute the budgeted amount for purchases of direct materials during the year.

b. Compute the budgeted amount for cash payments during the year to suppliers of materials.

2) Deep Valley Foods manufactures a product that is first smoked and then packed for shipment to customers. During a normal month the product’s direct labor cost per pound is budgeted using the following information.

	Direct Labor Hours (per pound)	Budgeted Direct Labor Cost (per hour)
Process:
Smoking	0.08		$20
Packing	0.06		12

  

The budget for March calls for the production of 500,000 pounds of product. However, March’s direct labor costs for smoking are expected to be 5 percent above normal due to anticipated scheduling inefficiencies. Yet direct labor costs in the packing room are expected to be 4 percent below normal because of changes in equipment layout.

Prepare a budget for direct labor costs in March using three column headings: Total, Smoking, and Packing.

Answer 1