Production and Direct Labor Cost Budgets

Two-Leg Company manufactures slacks and jeans under a variety of brand names, such as Dockers® and 501 Jeans®. Slacks and jeans are assembled by a variety of different sewing operations. Assume that the sales budget for Dockers and 501 Jeans shows estimated sales of 37,050 and 68,510 pairs, respectively, for May. The finished goods inventory is assumed as follows:

Assume the following direct labor data per 10 pairs of Dockers and 501 Jeans for four different sewing operations:

a. Prepare a production budget for May. Prepare the budget in two columns: Dockers® and 501 Jeans®. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

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Remember to take into account expected units to be sold, desired units in ending inventory and estimated units in beginning inventory when calculating total units to be produced.

Learning Objective 4.

b. Prepare the May direct labor cost budget for the four sewing operations, assuming a $13 wage per hour for the inseam and outerseam sewing operations and a $19 wage per hour for the pocket and zipper sewing operations. Prepare the direct labor cost budget in four columns: inseam, outerseam, pockets, and zipper.

Zume Pizza: Cost-Volume-Profit Analysis

Zume Pizza uses a combination of robots, artificial intelligence (AI), and GPS in its food trucks to deliver pizzas to customers’ houses just as the pizza is finished baking. Pizzas are actually prepared and baked in the Zume pizza truck by an employee assisted by robots. Zume Pizza started operations in April 2016 and is currently selling about 250 pizzas per day.

The pizza delivery process starts with a customer using Zume Pizza’s app to order pizza. The pizza combinations offered by Zume have been derived by analyzing customer data to offer several popular options. These preset combination recipes are programmed into Zume’s computers, so that its robots can build and bake the pizzas efficiently.

All pizza preparation and baking happens in the Zume pizza truck. Once the customer orders a pizza, a worker in the Zume food truck will toss the dough, cut the vegetables, and put on toppings. A robot will put on the pizza sauce. Each Zume pizza truck has 56 pizza ovens, which are each individually connected to the order system and the truck’s GPS. A robot will put the pizza into the designated oven exactly four minutes before the truck reaches the customer’s house. A worker will pull out the pizza when it is finished and place it into the cutter, where a robot will cut the pizza. The pizza is boxed and the pizza is delivered to the customer’s door, all within a few minutes of finishing baking. Eventually, Zume’s owners hope to use a robot to remove pizzas from the oven as well.

Assume that average selling price per pizza is about $18. To follow are estimates of costs that might be incurred by Zume Pizza in its pizza business.

Description and Cost estimate (in dollars)

• Ingredient cost per pizza: $6.00
• Truck fuel cost per delivery: $3.00
• Cost of pizza delivery truck (estimated useful life 5 years, no salvage value): $80,000
• Cost of initial software development (estimated useful life 3 years): $30,000
• Annual maintenance/update costs of software: $25,000
• Supplies cost per pizza (box, napkins, etc.): $1.00
• Cost to park pizza delivery truck per year (garage facility): $24,000
• Insurance and other regulatory costs per year: $36,000
• Cost of cofounders’ salaries per year: $150,000
• Cost to rent restaurant kitchen facility for testing and food prep (per year): $45,000
• Direct labor cost per pizza (driving truck and preparing pizza in truck): $5.00

Initial Question:

Please address the question(s) below. In your post, please support your response (why do you think so?)

From the list above, what costs would you classify as variable with respect to the cost of a Zume pizza? Are there any other variable costs you could envision that Zume might incur per pizza? Explain.

From the list above, what costs would you classify as fixed with respect to the cost of a Zume pizza? Are there any other fixed costs you could envision that Zume might incur in its pizza business? Explain.

(Appendix 6A) FIFO; Production Report

Aztec Inc. produces soft drinks. Mixing is the first department, and its output is measured in gallons. Aztec uses the FIFO method. All manufacturing costs are added uniformly. For July, the mixing department provided the following information:

Required:

Prepare a production report.

Aztec Inc. produces soft drinks. Mixing is the first department, and its output is measured in gallons. Aztec uses the FIFO method. All manufacturing costs are added uniformly. For July, the mixing department provided the following information:
Production:
Units in process, July 1, 60% complete 18,000 gallons
Units completed and transferred out 132,000 gallons
Units in process, July 31, 65% complete 20,000 gallons

Costs:
Work in process, July 1 $36,000
Costs added during July 389,180

Required: Prepare a production report. Aztec Inc.

Mixing Department Production Report For the Month of July (FIFO Method)
Unit Information Physical flow:

Units to account for:
Units Units in beginning WIP 18,000
Units started 20,000
Total units to account for 38,000
Units to account for:
Units started and completed 0
From beginning WIP 18,000
Units in ending WIP 20,000
Total units to account for 38,000
Equivalent units:
Units Started and completed 0
To complete beginning WIP 7,200
Units in ending WIP 13,000
Total equivalent units 20,200
Cost Information
Costs to account for:
Dollars Costs in beginning WIP $ 36,000
Costs added by department 389,180
Total costs to account for $ 425,180
Cost per equivalent unit $ 21.05
Costs accounted for:
Total Transferred out:
Units started and completed $
Units in beginning work in process:
From prior period 36,000
From current period
Total cost transferred out $
Goods in ending work in process
Total costs accounted for $

(Appendix 6A) FIFO; Production Report

Aztec Inc. produces soft drinks. Mixing is the first department, and its output is measured in gallons. Aztec uses the FIFO method. All manufacturing costs are added uniformly. For July, the mixing department provided the following information:

Required:

Prepare a production report.

(Appendix 6A) FIFO; Production Report

Aztec Inc. produces soft drinks. Mixing is the first department, and its output is measured in gallons. Aztec uses the FIFO method. All manufacturing costs are added uniformly. For July, the mixing department provided the following information:

Required:

Prepare a production report.

(Appendix 6A) FIFO; Production Report

Aztec Inc. produces soft drinks. Mixing is the first department, and its output is measured in gallons. Aztec uses the FIFO method. All manufacturing costs are added uniformly. For July, the mixing department provided the following information:

Required:

Prepare a production report.

(Appendix 6A) FIFO; Production Report

Aztec Inc. produces soft drinks. Mixing is the first department, and its output is measured in gallons. Aztec uses the FIFO method. All manufacturing costs are added uniformly. For July, the mixing department provided the following information:

Required:

Prepare a production report.

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(Appendix 6A) FIFO; Production Report

Aztec Inc. produces soft drinks. Mixing is the first department, and its output is measured in gallons. Aztec uses the FIFO method. All manufacturing costs are added uniformly. For July, the mixing department provided the following information:

Required:

Prepare a production report.

(Appendix 6A) FIFO; Production Report

Aztec Inc. produces soft drinks. Mixing is the first department, and its output is measured in gallons. Aztec uses the FIFO method. All manufacturing costs are added uniformly. For July, the mixing department provided the following information:

Required:

Prepare a production report.