Question

Exercise 7-2 Production Budget [LO7-3]

Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows:

	Sales in Units
April		78,000
May		85,000
June		118,000
July		94,000

The company is now in the process of preparing a production budget for the second quarter. Past experience has shown that end-of-month inventory levels must equal 20% of the following month’s sales. The inventory at the end of March was 15,600 units.

Required:

Prepare a production budget for the second quarter; in your budget, show the number of units to be produced each month and for the quarter in total. Down Under Products, Ltd., Production Budget April May June Quarter Budgeted units sales 78,000 85,000 118,000 281,000 Add: Desired units of ending finished goods inventory ? ? ? ? Total needs 78,000 85,000 118,000 281,000 ? ? ? ? ? Required production in units 78,000 85,000 118,000 281,000 please show work. Exercise 7-3 Direct Materials Budget [LO7-4] Two grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $1.70 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3:      Year 2 Year 3 First Second Third Fourth First   Budgeted production, in bottles 78,000 108,000 168,000 118,000 88,000          Musk oil has become so popular as a perfume ingredient that it has become necessary to carry large inventories as a precaution against stock-outs. For this reason, the inventory of musk oil at the end of a quarter must be equal to 20% of the following quarter’s production needs. Some 31,200 grams of musk oil will be on hand to start the first quarter of Year 2.    Required: Prepare a direct materials budget for musk oil, by quarter and in total, for Year 2. (Round "Unit cost of raw materials" answers to 2 decimal places.) Mink Caress Direct Materials Budget - Year 2 Quarter First Second Third Fourth Year Required production in units of finished goods Units of raw materials needed per unit of finished goods Units of raw materials needed to meet production Total units of raw materials needed 0 0 Units of raw materials to be purchased 0 0 0 0 0 Unit cost of raw materials Cost of raw materials to be purchased please show work Exercise 7-4 Direct Labor Budget [LO7-5] The production manager of Rordan Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter   Units to be produced 10,600 8,500 7,000 11,100 Each unit requires 0.35 direct labor-hours, and direct laborers are paid $20.00 per hour. Required: 1. Complete the company’s direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced. (Round "Direct labor time per unit (hours)" answers to 2 decimal places.) Rordan Corporation Direct Labor Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Required production in units Direct labor time per unit (hours) Total direct labor-hours needed Direct labor cost per hour Total direct labor cost 2. Complete the company’s direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is not adjusted each quarter. Instead, assume that the company’s direct labor workforce consists of permanent employees who are guaranteed to be paid for at least 3,000 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 3,000 hours anyway. Any hours worked in excess of 3,000 hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct labor. (Input all amounts as positive values Rordan Corporation Direct Labor Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Total direct labor-hours needed Regular hours paid Overtime hours paid 0 0 0 0 Wages for regular hours $0 Overtime wages Total direct labor cost $0 $0 $0 $0 $0

Answer 1