Black Diamond Company produces snow skis. Each ski requires 2 pounds of carbon f

Question

Black Diamond Company produces snow skis. Each ski requires 2 pounds of carbon fiber. The company’s management predicts that 5,800 skis and 6,800 pounds of carbon fiber will be in inventory on June 30 of the current year and that 158,000 skis will be sold during the next (third) quarter. A set of two skis sells for $380. Management wants to end the third quarter with 4,300 skis and 4,800 pounds of carbon fiber in inventory. Carbon fiber can be purchased for $23 per pound. Each ski requires 0.5 hours of direct labor at $28 per hour. Variable overhead is applied at the rate of $16 per direct labor hour. The company budgets fixed overhead of $1,790,000 for the quarter.

Prepare the third-quarter production budget for skis.

Prepare the third-quarter production budget for skis.

Explanation / Answer

Production for skis = sales +ending inventory -Beginning inventory

                            = 158,000 + 4300 - 5800

                            = 156500 skis

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