Required information Problem 22-1A Manufacturing: Preparing production and manuf

Question

Required information Problem 22-1A Manufacturing: Preparing production and manufacturing budgets LO C2, P1 The following information applies to the questions displayed below] Black Diamond Company produces snow skis. Each ski requires 2 pounds of carbon fiber. The company's management predicts that 5,600 skis and 6,600 pounds of carbon fiber will be in inventory on June 30 of the current year and that 156,000 skis will be sold during the next (third) quarter. A set of two skis sells for $360. Management wants to end the third quarter with 4,100 skis and 4,600 pounds of carbon fiber in inventory. Carbon fiber can be purchased for $21 per pound. Each ski requires 0.5 hours of direct labor at $26 per hour. Varlable overhead is applied at the rate of $14 per direct labor hour. The company budgets fixed overhead of $1,788,000 for the quarter. Problem 22-1A Part 2 2. Prepare the third-quarter direct materials (carbon fiber) budget, include the dollar cost of purchases. BLACK DIAMOND COMPANY Direct Materials Budget Third Quarter Budgeted production Materials needed for production (lbs.) Total materials requirements (Ibs.) Direct materials to be purchased (lbs.) Budgeted cost of direct materials purchases

Explanation / Answer

BLACK DIAMOND COMPANY Direct Materials Budget Third Quarter Budgeted Production (156,000 + 4,100 - 5,600) 154,500 Carbon fiber requires per ski 2 Materials needed for production(lbs.) 309,000 Add: Ending inventory required 4,600 Total materials requirements (lbs.) 313,600 Less: Beginning inventory 6,600 Direct materials to be purchased (lbs.) 307,000 Price per lbs. $21 Budgeted cost of direct materials purchases $6,447,000

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