Question

In: Accounting

Note: I need a step by step answer to the following problem to better understand how...

Note: I need a step by step answer to the following problem to better understand how this works.

Hot Coffee Manufacturing produces and sells oak tables. The budgeted   manufacturing costs per table are as follows:

Direct costs

                Oak top                48 square feet at $10 per sq. ft.

                Table legs                 4 legs at $5 per leg

Direct labor is 3 hours and 24 minutes per table at $15 per hour.

The variable overhead rate is $6 per direct labor hour and the fixed overhead rate is $8 per direct labor hour.

Inventories are expected to be as follows:

Beginning

Target Ending

Direct Materials

      Oak tops

500

550

      Table legs

240

200

Finished Goods

20 tables

30 tables

               

Budgeted Sales for May, Year 18 are expected to be 2,000 tables. Selling prices are budgeted to be $600 per table.

For May Year 18, prepare a

Sales Budget.

Production Budget in units

Direct materials budget in units and in dollars

Manufacturing Labor Budget

Overhead Budget

Refer to A above, the company expects to have beginning cash of $150,000 on May 1, Year 18. In addition to the above expenditures, the company is expected to have the following expenses the income statement:

Selling Expenses                               24,000

Administrative Expenses                16,000

Depreciation                                        20,000

Prepare a cash budget for May Year 18

Solutions

Expert Solution

Solution:

Part 1 – Sales Budget

Sales Budget for May

Budgeted Sales Units (tables)

2000

Selling Price per table

$600

Budgeted Sales Revenue (1200*600)

$1,200,000

Part 2 – Production Budget in Units

Production Budget

Expected Sales Units

2,000

Plus: Desired Ending Inventory

30

Total Units needed

2030

Less: Expected Beginning Inventory

20

Production Requirements

2010

Part 3 – Direct materials budget in unit and in dollars

Oak Tops

Table Legs

Total

Production requirements (number of tables)

2010

2010

Raw material required per table

48 feet

4 legs

Raw material required for production

96480

8040

Plus: Desired Ending Inventory

550

200

Total raw materials need

97030

8240

Less: Beginning Inventory

500

240

Raw material to be purchased

96530

8000

Cost per unit

$10.00

$5.00

Cost of purchases

$965,300

$40,000

$1,005,300

Part 4 – Manufacturing Labor Budget

Direct labor Cost budget

Units to be produced (from part 2)

2010

Required Direct Labor time per unit (3 hours and 24 minutes per table)

3.40

Total required direct labor time

6834

Direct labor rate per hour

$15

Total Direct labor cost

$102,510

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Pls ask separate question for remaining parts.


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