Question

Required information (The following information applies to the questions displayed below.] Black Diamond Company produces snow skis. Each ski requires 2 pounds of carbon fiber. The company's management predicts that 6,900 skis and 7,900 pounds of carbon fiber will be in inventory on June 30 of the current year and that 169,000 skis will be sold during the next (third) quarter. A set of two skis sells for $490. Management wants to end the third quarter with 5,400 skis and 5,900 pounds of carbon fiber in inventory. Carbon fiber can be purchased for $18 per pound. Each ski requires 0.5 hours of direct labor at $23 per hour. Variable overhead is applied at the rate of $13 per direct labor hour. The company budgets fixed overhead of $1,801,000 for the quarter. 2. Prepare the third-quarter direct materials (carbon fiber) budget; include the dollar cost of purchases. BLACK DIAMOND COMPANY Direct Materials Budget Third Quarter Budgeted production Materials needed for production (lbs.) Total materials requirements (lbs.) Direct materials to be purchased (lbs.) Budgeted cost of direct materials purchases

Answer 1

BLACK DIAMOND COMPANY
Production Budget (in units)
Third Quarter
Budgeted unit sales for quarter                   (a)	169,000
Budgeted ending inventory                          (b)	5,400
Required units of available production       (c = a + b)	174,400
Budgeted beginning inventory                     (d)	6,900
Units to be manufactured                          (c - d)	167,500

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BLACK DIAMOND COMPANY
Direct Material Budget
Third Quarter
Budgeted production       [Refer production budget]             (a)	167,500	units
Material requirement per unit                                               (b)	2	lbs
Total Pounds Needed for Production                                   (c = a x b)	335,000	lbs
Budgeted ending inventory                                                    (d)	5,900	lbs
Total Materials Requirement                                             (e = c + d)	340,900	lbs
Budgeted beginning inventory                                              (f = d + e)	7,900	lbs
Materials to be purchased                                                   (g = e - f)	333,000	lbs
Materials price per pound                                                     (h)	$18.00	per lbs
Total Cost of direct materials Purchases                           (g x h)	$5,994,000

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BLACK DIAMOND COMPANY
Direct Labor Budget
Third Quarter
Units to be produced     [Refer production budget]                    (a)	167,500	units
Labor requirements per unit (hrs.)                                              (b)	0.50	hours per unit
Total labor hours needed                                                            (c = a x b)	83,750	hours
Labor rate (per hour)                                                                   (d)	$23	per hr.
Labor dollars                                                                               (c x d)	$1,926,250

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BLACK DIAMOND COMPANY
Factory Overhead Budget
Third Quarter
Total labor hours needed   [Refer direct labor budget]          (a)	83,750
Variable overhead rate per DL hour                                       (b)	$13
Budgeted variable overhead                                                   (c = a + b)	$1,088,750
Budgeted fixed overhead                                                         (d)	$1,801,000
Budgeted total overhead                                                          (c + d)	$2,889,750