Question

Materials and Labor Requirements Direct materials Wood Fiberglass Direct manufacturing labor 13 board feet (b.f.) per snowboard 11 yards per snowboard 7 hours per snowboard

Answer 1

1.

Revenue Budget
For January 2018
	Units	Selling Price	Total revenues
Snowboard	3,400	$              1,000	$        3,400,000

2.

Production Budget
For January 2018
Budgeted unit sales	3400
Add Target ending finished goods inventory	800
Total Required unit	4200
Deduct Beginning finished goods inventory	700
Units of Finished goods to be produced	3500

3.

Direct Material Usage Budget in Quantity and Dollars
For January 2018
	Material
	Wood	Fiberglass	Total
Physical Unit Budget
Direct Material required for
Snowboards	45500 (b.f)	38500 (yds)
Cost budget
Available from beginning direct material inventory
(Under FIFO cost flow assumption)
Wood (2060 x $34)	$       70,040
Fiberglass (1060 x $10)		$          10,600
To be purchased this period
Wood ((45500-2060) x $36)	$ 1,563,840
Fiberglass ((38500-1060) x $11)		$        411,840
Direct materials to be used this period	$ 1,633,880	$        422,440	$        2,056,320
Direct Material Purchase Budget
For January 2018
	Material
	Wood	Fiberglass	Total
Physical units budget
To be used in production	45500	38500
Add Target ending inventory	1560	2060
Total requirement	47060	40560
Deduct Beginning inventory	2060	1060
Purchases to be made	45000	39500
Cost budget
Purchases (Purchase qty x Price in 2018)	$ 1,620,000	$        434,500	$        2,054,500

4.

Direct manufacturing Labor cost Budget
For January 2018
	Output Units Produced	DMLH Per Unit	Total Hours	Hourly Wage rate	Total
Snowboards	3500	7	24500	$                31	$        759,500

5.

Variable manufacturing overhead rate x Direct manufacturing labor hours = Variable manufacturing overhead costs

$16 x 24500 = $392,000

Manufacturing Overhead Budget
For January 2018
Variable manufacturing overhead cost	$             392,000
Fixed manufacturing overhead cost	$               98,000
Total	$             490,000

6.

Total manufacturing overhead / Direct manufacturing labor hours = Budgeted manufacturing overhead rate

$490,000 / 24500 = $20

7.

Total manufacturing overhead / Budgeted output = Budgeted manufacturing cost per output unit

$490,000 / 3500 = $140

8.

Unit cost of Manufacturing Finished Goods
For January 2018
	Cost per unit of output	Input per unit of output	Total
Direct Material
Wood	$468	13 b.f
Fiberglass	$121	11 yds
Direct manufacturing labor	$217	7 hrs
Budgeted manufacturing overhead			$140
Total			$946

9.

Ending Inventories Budget
For January 2018
	Quantity	Cost per Unit	Total
Direct Material
Wood	1560	$36	$56,160
Fiberglass	2060	$11	$22,660
Finished Goods
Snowboard	800	$946	$756,800
Total Ending Inventory			$835,620

10.

Cost of Goods Sold Budget
For January 2018
Beginning finished goods inventory Jan 1		$            631,400
Direct material used	$      2,056,320
Direct manufacturing labor	$          759,500
Manufacturing overhead	$          490,000
Cost of Goods manufactured		$        3,305,820
Cost of goods available for sale		$        3,937,220
Deduct Ending finished goods inventory Jan 31		$            756,800
Cost of Goods Sold		$        3,180,420

11.

Budgeted Income Statement
For January 2018
Revenues	$ 3,400,000
Cost of Goods Sold	$ 3,180,420
Gross Margin	$      219,580
Operating (non manufacturing) costs (($310x40) + $37000)	$        49,400
Operating Income	$      170,180