1. Down Under Products, Ltd., of Australia has budgeted sales of its popular boo
ID: 2335621 • Letter: 1
Question
1. Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows:
The company is now in the process of preparing a production budget for the second quarter. Past experience has shown that end-of-month inventory levels must equal 20% of the following month’s unit sales. The inventory at the end of March was 12,000 units.
Required:
Prepare a production budget by month and in total, for the second quarter.
2. Two grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $1.70 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3:
Musk oil has become so popular as a perfume ingredient that it has become necessary to carry large inventories as a precaution against stock-outs. For this reason, the inventory of musk oil at the end of a quarter must be equal to 20% of the following quarter’s production needs. Some 31,200 grams of musk oil will be on hand to start the first quarter of Year 2.
Required:
Prepare a direct materials budget for musk oil, by quarter and in total, for Year 2. (Round "Unit cost of raw materials" answers to 2 decimal places.)
3. The direct labor budget of Yuvwell Corporation for the upcoming fiscal year contains the following details concerning budgeted direct labor-hours:
The company uses direct labor-hours as its overhead allocation base. The variable portion of its predetermined manufacturing overhead rate is $4.00 per direct labor-hour and its total fixed manufacturing overhead is $64,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $16,000 per quarter.
Required:
1. Prepare the company’s manufacturing overhead budget for the upcoming fiscal year.
2. Compute the company’s predetermined overhead rate (including both variable and fixed manufacturing overhead) for the upcoming fiscal year.
Unit Sales April 60,000 May 80,000 June 100,000 July 85,000Explanation / Answer
Solution 1:
Solution 2:
Solution 3.1:
Solution 3.2:
Down under Products Ltd Production Budget 2nd quarter of the year Particulars April May June Quarter Unit Sales 60000 80000 100000 240000 Add: Desired Ending Inventory (20% of following month sale) 16000 20000 17000 17000 Total Needed 76000 100000 117000 257000 Less: Beginning Inventory 12000 16000 20000 12000 Required production in units 64000 84000 97000 245000Related Questions
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