IThe following information applies to the questions displayed below. Black Dlamo

Question

IThe following information applies to the questions displayed below. Black Dlamond Company produces snow skis. Each ski requires 3 pounds of carbon flber. The company's management predicts that 5,300 skis and 6,300 pounds of carbon fiber wll be in inventory on June 30 of the current year and that 153,000 skis will be sold during the next (third) quarter. A set of two skis sells for $330. Management wants to end the third quarter with 3,800 skis and 4,300 pounds of carbon flber in inventory Carbon flber can be purchased for $18 per pound. Each ski requires 0.5 hours of direct labor at $23 per hour Variable overhead is applied at the rate of $11 per direct labor hour. The company budgets fixed overhead of $1,785,000 for the quarter

Explanation / Answer

Production budget for Third Quarter BLACK DIAMOND COMPANY Production budget (in units) Third Quarter Ending Inventory 3800 Add : Units to be sold 153000 Required units of available production 156800 Less : Beginning Inventory 5300 Units to be manufactured 151500 Direct Material Budget for Third Quarter BLACK DIAMOND COMPANY Direct Material Budget Third Quarter Budgeted Production (units) 151500 X Carbon fiber needed per ski (in lbs) 3 Materials Needed for Production (in lbs) 454500 Add : Ending Inventory of carbon Fiber (in lbs) 4300 Total Material Requirement (in lbs) 458800 Less : Beginning Inventory of Carbon Fiber (in lbs) 6300 Materials to be purchased (in lbs) 452500 X Carbon Fiber cost per pound $18.00 Total Cost of Direct Material Purchases $8,145,000.00 Direct Labour budget for Third Quarter BLACK DIAMOND COMPANY Direct Labour Budget Third Quarter Units to be produced 151500 x Direct Labour hour required per unit 0.5 Total Labour hours needed 75750 x Labour cost per hour $23.00 Labour Dollars $1,742,250.00 Factory Overhead budget for Third Quarter BLACK DIAMOND COMPANY Factory Overhead Budget Third Quarter Total Labour hours needed 75750 X Variable Overhead rate per hour $11.00 Variable Overheads $833,250.00 Fixed Overheads $1,785,000.00 Total Factory Overheads $2,618,250.00

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