2 Exercise 8.17 Crescent Company produces stuffed toy animals; one of these is \

Question

2 Exercise 8.17 Crescent Company produces stuffed toy animals; one of these is "Arabeau the Cow." Each Arabeau takes 0.20 yard of fabric (white with irregular black splotches) and eight ounces of polyfiberfill. Fabric costs $3.50 per yard and polyfiberfill is $0.05 per ounce. Crescent has budgeted production of Arabeaus for the next four months as follows: Direct Materials Purchases Budget: Direct Labor Budget Units October November December January 42,000 90,000 50,000 40,000 Inventory policy requires that sufficient fabric be in ending monthly inventory to satisfy 20 percent of the following month's production needs and sufficient polyfiberfill be in inventory to satisfy 40 percent of the following month's production needs. Inventory of fabric and polyfiberfill at the beginning of October equals exactly the amount needed to satisfy the inventory policy Each Arabeau produced requires (on average) 0.10 direct labor hour. The average cost of direct labor is S15 per hour Required: 1. Prepare a direct materials purchases budget of fabric for the last quarter of the year showing 2. purchases in units and in dollars for each month and for the quarter in total. Prepare a direct materials purchases budget of polyfiberfill for the last quarter of the year showing purchases in units and in dollars for each month and for the quarter in total. Prepare a direct labor budget for the last quarter of the year showing the hours needed and the direct labor cost for each month and for the quarter in total. 3.

Explanation / Answer

RAW MATERIAL PURCHASE BUDGET-fabric OCT NOV DEC QUARTER JAN Budgeted Produced 42,000 90,000 50,000 182,000 40,000 DM per unit 0.20 0.20 0.20 0.20 0.20 Pproduction needs 8,400 18,000 10,000 36,400 8,000 Add: Desired Ending Inventory 3,600 2,000 1,600 1,600 Total needs 12,000 20,000 11,600 38,000 Less: Beginning Inventory 1,680 3,600 2,000 1,680 Purchase Units 10,320 16,400 9,600 36,320 Cost price per unit 3.50 3.50 3.50 3.50 Budgeted Purchase in $ 36,120 57,400 33,600 127,120 RAW MATERIAL PURCHASE BUDGET-Polyfiberfrill OCT NOV DEC QUARTER JAN Budgeted Produced 42,000 90,000 50,000 182,000 40,000 DM per unit 8.00 8.00 8.00 8.00 8.00 Pproduction needs 336,000 720,000 400,000 1,456,000 320,000 Add: Desired Ending Inventory 288,000 160,000 128,000 128,000 Total needs 624,000 880,000 528,000 1,584,000 Less: Beginning Inventory 134,400 288,000 160,000 134,400 Purchase Units 489,600 592,000 368,000 1,449,600 Cost price per unit 0.05 0.05 0.05 0.05 Budgeted Purchase in $ 24,480 29,600 18,400 72,480 LABOUR COST BUDGETS OCT NOV DEC QUARTER Units to be produced 42,000 90,000 50,000 182,000 Labour required per unit 0.1 0.1 0.1 0.1 Labour hours 4200 9000 5000 18200 Labuor Rate per hour 15 15 15 15 Budgeted Labour cost in $ 63,000 135,000 75,000 273,000

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