Problem 10-9 (Part Level Submission) (a) Prepare a production budget for each qu

ID: 2472991 • Letter: P

Question

Problem 10-9 (Part Level Submission)

(a)

Prepare a production budget for each quarter of 2015.

Problem 10-9 (Part Level Submission)

Fenzel Slide Oil produces a lubricant, SlickTone, which is used on trombone slides. Information about the budget for the year 2015 is as follows:
1. The company expects to sell 7,600 bottles of SlickTone in the first quarter, 6,400 in the second quarter, 10,000 in the third quarter, and 8,800 in the fourth quarter. 2. A bottle of SlickTone requires 5 ounces of Chemical A and 3.5 ounces of Chemical B. 3. For the first, second, and third quarters of 2015, the desired ending inventory of finished goods is equal to 8 percent of next quarter’s sales, whereas the desired ending inventory for material is 13 percent of next quarter’s production requirements. 4. There are 1,500 bottles of SlickTone, 4,700 ounces of Chemical A, and 1,700 ounces of Chemical B on hand at the beginning of the first quarter. 5. At the end of the fourth quarter, the company must have 900 bottles of SlickTone, 8,300 ounces of Chemical A, and 4,900 ounces of Chemical B to meet its needs in the first quarter of 2016. 6. The cost of Chemical A is $1.10 per ounce, the cost of Chemical B is $0.13 per ounce, and the selling price of SlickTone is $13 per bottle. 7. The cost of direct labor is $0.50 per bottle, and the cost of variable overhead is $0.65 per bottle. Fixed manufacturing overhead is $2,600 per quarter. 8. Variable selling and administrative expense is 3 percent of sales and fixed selling and administrative expense is $3,300 per quarter.

Explanation / Answer

Answer:

Here is the Production Budget for Each Quarter of 2015

Fenzel Slide Oil

Production Budget for each quarter for 2015

Quarter

Total

Budgeted Sales Unit

7,600

6,400

10,000

8,800

32,800

Add: Ending Inventory

512

800

704

900

2,916

Less: Beginning Inventory

(1,500)

(512)

(800)

(704)

(3,516)

Budgeted Production Unit

6,612

6,688

9,904

8,996

32,200