NSA Company produces baseball bats. Each bat requires 3 pounds of aluminum alloy

Question

NSA Company produces baseball bats. Each bat requires 3 pounds of aluminum alloy. Management predicts that 8,000 bats and 15,000 pounds of aluminum alloy will be in inventory on March 31 of the current year and that 250,000 bats will be sold during this year's second quarter. Bats sell for $80 each. Management wants to end the second quarter with 6,000 finished bats and 12,000 pounds of aluminum alloy in inventory. Aluminum alloy can be purchased for $4 per pound. Each bat requires 0.5 hours of direct labor at $18 per hour. Variable overhead is applied at the rate of $12 per direct labor hour. The company budgets fixed overhead of $1,776,000 for the quarter. Required Prepare the second-quarter production budget for bats. Prepare the second-quarter direct materials (aluminum alloy) budget; include the dollar cost of purchases. Prepare the direct labor budget for the second quarter. Prepare the factory overhead budget for the second quarter.

Explanation / Answer

1.) Production Budget for Bat for Qtr 2 Nos Closing Stock Estimate               6,000 Add:- Sale for the Qtr         2,50,000 Less:- Opening Stock               8,000 Production in Qtr 2         2,48,000 2. Direct Material Budget Qty Rate Amount Pound $/Pound $ Closing Stock             12,000                  4                 48,000 Add:- Material Requirement         7,44,000                  4           29,76,000 (248000X3) Less:- Opening Stock             15,000                  4                 60,000 Material Purchases         7,41,000           29,64,000 anD Material Consumption         7,44,000           29,76,000 3) Direct Labour Budget Hrs Rate Amount Labour cost         1,24,000               18           22,32,000 (248000X 0.5) 4) Overhead Budget Hrs Rate Amount Labour cost         1,24,000               12           14,88,000 (248000X 0.5) 5) Income statement for Quarter 2 Qty Amount Sales         2,50,000               80         200,00,000 Less:- Exp Material Consumption           29,76,000 Direct Labour           22,32,000 Overhead           14,88,000 Fixed Cost           17,76,000           84,72,000         115,28,000 Less:- Decrease in FG stock 2000         34.16                 68,323 (8000-6000) Net Profit         114,59,677 * Cost of the bat $ Direct Material (3 Pound X4)         12.00 Direct Labour (0.5 hr X 18)            9.00 Variable Overhead (0.5 hrX 12)            6.00 Fixed overhead            7.16 (1776000/248000)         34.16

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