Question

Ornamental Sculptures Mfg. manufactures garden sculptures. Each sculpture requires 8 pounds of direct materials at a cost of $4 per pound and 0.4 direct labor hours at a rate of $11 per hour. Variable manufacturing overhead is charged at a rate of $3 per direct labor hour. Fixed manufacturing overhead is $4,200 per month. The company’s policy is to maintain direct materials inventory equal to 20% of the next month’s materials requirement. At the end of February the company had 5,080 pounds of direct materials in inventory. The company’s production budget reports the following.

Production Budget	March		April		May
Units to be produced	4,000		4,900		5,700

(1) Prepare direct materials budgets for March and April.
(2) Prepare direct labor budgets for March and April.
(3) Prepare factory overhead budgets for March and April.

Answer 1

Direct Material Budget
	March	April	May
Units to be produced	4,000	4,900	5,700
Raw material per unit	8	8	8
Material required for production	32,000	39,200	45,600
Add: Desired Ending Inventory	7,840	9,120
Total material required	39,840	48,320
Less: Beginning Inventory	5,080	7,840
Required purchases	34,760	40,480
Cost per unit	4	4
Budgeted Cost of raw material purchases	139,040	161,920
Direct labor Budget
	March	April
Units to be produced	4,000	4,900
Labor hours per unit	0.4	0.4
Total labor hours required	1,600	1,960
Rate per hour	11	11
Budgeted Direct labor cost	17,600	21,560
Factory Overheads Budget
	March	April
Total labor hours required	1,600	1,960
Variable Overhead rate per hour	3	3
Budgeted Variable overheads	4,800	5,880
Budgeted Fixed overheads	4,200	4,200
Total Budgeted Overheads	9,000	10,080