Question

Oliver​, Inc. manufactures model airplane kits and projects production at 500​, 530​, 550​, and 650 kits for the next four quarters.

Direct materials are 5 ounces of plastic per kit and the plastic costs $3 per ounce. Indirect materials are considered insignificant and are not included in the budgeting process. Beginning Raw Materials Inventory is 890ounces, and the company desires to end each quarter with 20​% of the materials needed for the next​ quarter's production.

Oliver desires a balance of 300 ounces in Raw Materials Inventory at the end of the fourth quarter. Each kit requires 0.75 hours of direct labor at an average cost of $35 per hour. Manufacturing overhead is allocated using direct labor hours as the allocation base. Variable overhead is $0.30 per​ kit, and fixed overhead is $175 per quarter.

Prepare Oliver​'s direct materials​ budget, direct labor​ budget, and manufacturing overhead budget for the year. Round the direct labor hours needed for​ production, budgeted overhead​ costs, and predetermined overhead allocation rate to two decimal places. Round other amounts to the nearest whole number.

Answer 1

Direct Materials Budget
For the Year Ended December 31
	First Quarter	Second Quarter	Third Quarter	Fourth Quarter	Total
Budgeted kits to be produced	500.00	530.00	550.00	650.00	2,230.00
Direct materials Ounces Per kit	5.00	5.00	5.00	5.00	5.00
Direct materials needed for production	2,500.00	2,650.00	2,750.00	3,250.00	11,150.00
Plus: Desired DM in ending inventory	530.00	550.00	650.00	300.00	300.00
Total direct materials needed	3,030.00	3,200.00	3,400.00	3,550.00	11,450.00
Less: DM in beginning inventory	890.00	530.00	550.00	650.00	890.00
Budgeted purchases of direct materials	2,140.00	2,670.00	2,850.00	2,900.00	10,560.00
Direct Materials Cost per ounce	3.00	3.00	3.00	3.00	3.00
Budgeted Cost of Direct Materials purchases	6,420.00	8,010.00	8,550.00	8,700.00	31,680.00

Direct Labor Budget
For the Year Ended December 31
	First Quarter	Second Quarter	Third Quarter	Fourth Quarter	Total
Budgeted kits to be produced	500.00	530.00	550.00	650.00	2,230.00
Direct labor hours per kit	0.75	0.75	0.75	0.75	0.75
Direct labor hours needed for production	375.00	397.50	412.50	487.50	1,672.50
Direct labor cost per hour	35.00	35.00	35.00	35.00	35.00
Budgeted direct labor cost	13,125.00	13,912.50	14,437.50	17,062.50	58,537.50

Manufacturing Overhead Budget
For the Year Ended December 31
	First Quarter	Second Quarter	Third Quarter	Fourth Quarter	Total
Budgeted kits to be produced	500.00	530.00	550.00	650.00	2,230.00
Variable overhead cost per kit	0.30	0.30	0.30	0.30	0.30
Budgeted Variable Overhead	150.00	159.00	165.00	195.00	669.00
Budgeted Fixed Overhead	175.00	175.00	175.00	175.00	700.00
Budgeted Manufacturing Overhead costs	325.00	334.00	340.00	370.00	1,369.00
Direct labor hours	375.00	397.50	412.50	487.50	1,672.50
Budgeted Manufacturing Overhead costs					1,369.00
Predetermined Overhead Allocation Rate					1.22