Question
In: Accounting
1. Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the...
1. Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows:
| Unit Sales | |||
| April | 60,000 | ||
| May | 80,000 | ||
| June | 100,000 | ||
| July | 85,000 | ||
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 unit
sales. The inventory at the end of March was 12,000 units.
Required:
Prepare a production budget by month and in total, for the second quarter.
2. 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.)
3. The direct labor budget of Yuvwell Corporation for the upcoming fiscal year contains the following details concerning budgeted direct labor-hours:
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |
| Budgeted direct labor-hours | 9,600 | 9,000 | 9,300 | 10,100 |
The company uses direct labor-hours as its overhead allocation base. The variable portion of its predetermined manufacturing overhead rate is $4.00 per direct labor-hour and its total fixed manufacturing overhead is $64,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $16,000 per quarter.
Required:
1. Prepare the company’s manufacturing overhead budget for the upcoming fiscal year.
2. Compute the company’s predetermined overhead rate (including both variable and fixed manufacturing overhead) for the upcoming fiscal year.
Solutions
Expert Solution
Solution 1:
| Down under Products Ltd | ||||
| Production Budget | ||||
| 2nd quarter of the year | ||||
| Particulars | April | May | June | Quarter |
| Unit Sales | 60000 | 80000 | 100000 | 240000 |
| Add: Desired Ending Inventory (20% of following month sale) | 16000 | 20000 | 17000 | 17000 |
| Total Needed | 76000 | 100000 | 117000 | 257000 |
| Less: Beginning Inventory | 12000 | 16000 | 20000 | 12000 |
| Required production in units | 64000 | 84000 | 97000 | 245000 |
Solution 2:
| Direct Material Budget | |||||
| Particulars | Q1 | Q2 | Q3 | Q4 | Year 2 |
| Budgeted proction in bottles | 78000 | 108000 | 168000 | 118000 | 472000 |
| Material needed per unit -Grams of musk oil | 2 | 2 | 2 | 2 | 2 |
| Material needed for unit to produce - Grams | 156000 | 216000 | 336000 | 236000 | 944000 |
| Add: Desired ending units of musk oils (Grams) (20% of follwing quarter's production needs) | 43200 | 67200 | 47200 | 35200 | 35200 |
| Less: units of material in beginning inventory - Grams | 31200 | 43200 | 67200 | 47200 | 31200 |
| Units of material to purchase - Grams of musk oil | 168000 | 240000 | 316000 | 224000 | 948000 |
| Cost per gram of musk oil | $1.70 | $1.70 | $1.70 | $1.70 | $1.70 |
| Budgeted cost of raw material purchases - Musk oil | $285,600.00 | $408,000.00 | $537,200.00 | $380,800.00 | $1,611,600.00 |
Solution 3.1:
| Budgeted manufacturing overhead budget- YUVWELL Corporation | |||||
| Particulars | Q1 | Q2 | Q3 | Q4 | Year |
| Budgeted Direct labor hours | 9600 | 9000 | 9300 | 10100 | 38000 |
| Predetermined Variable overhead cost per unit | $4.00 | $4.00 | $4.00 | $4.00 | $4.00 |
| Budgeted variable overhead cost | $38,400.00 | $36,000.00 | $37,200.00 | $40,400.00 | $152,000.00 |
| Budgeted fixed overhead cost | $64,000.00 | $64,000.00 | $64,000.00 | $64,000.00 | $256,000.00 |
| Budgeted manufacturing overhead | $102,400.00 | $100,000.00 | $101,200.00 | $104,400.00 | $408,000.00 |
Solution 3.2:
| Particulars | Year |
| Total Budgeted Direct labor hours | 38000 |
| Total Budgeted fixed manufacturing overhead cost | $256,000.00 |
| Predetermined Fixed manufacturing overhead cost per unit | $6.73684 |
| Predetermined Variable manufacturing overhead cost per unit | $4.00 |
| Predetermined Overhead rate | $10.73684 |
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