Homework Help is Here – Start Your Trial Now!
Business
Accounting
Construct the direct labor budget

Construct the direct labor budget

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
icon
Concept explainers
Question
### Construct the Direct Labor Budget | | Year 2 Quarter | | | | | | |-------------------------------------|----------------|------------|------------|------------|-----------|------| | | 1 | 2 | 3 | 4 | Year | | | Required production (units) | ? | ? | ? | ? | ? | | | Direct labor-hours per unit | ? | ? | ? | ? | | | | Total direct labor-hours needed | ? | ? | ? | ? | | | | Direct labor cost per hour | ? | ? | ? | ? | | | | Total direct labor cost | ? | ? | ? | ? | ? | | **Explanation:** This table is designed to help construct a direct labor budget for Year 2. It breaks down each quarter's and the entire year's labor requirements and expenses into several key components: 1. **Required Production (units):** This row indicates how many units need to be produced each quarter and for the entire year. 2. **Direct Labor-Hours per Unit:** This row shows the number of labor hours required to produce one unit. 3. **Total Direct Labor-Hours Needed:** This row calculates the total number of direct labor hours required each quarter by multiplying the required production by the direct labor-hours per unit. 4. **Direct Labor Cost per Hour:** This row displays the cost for one hour of direct labor. 5. **Total Direct Labor Cost:** This represents the total cost of direct labor for each quarter and for the entire year, calculated by multiplying the total direct labor-hours needed by the direct labor cost per hour. All values are currently placeholders, indicated by question marks (?).
Transcribed Image Text:### Construct the Direct Labor Budget | | Year 2 Quarter | | | | | | |-------------------------------------|----------------|------------|------------|------------|-----------|------| | | 1 | 2 | 3 | 4 | Year | | | Required production (units) | ? | ? | ? | ? | ? | | | Direct labor-hours per unit | ? | ? | ? | ? | | | | Total direct labor-hours needed | ? | ? | ? | ? | | | | Direct labor cost per hour | ? | ? | ? | ? | | | | Total direct labor cost | ? | ? | ? | ? | ? | | **Explanation:** This table is designed to help construct a direct labor budget for Year 2. It breaks down each quarter's and the entire year's labor requirements and expenses into several key components: 1. **Required Production (units):** This row indicates how many units need to be produced each quarter and for the entire year. 2. **Direct Labor-Hours per Unit:** This row shows the number of labor hours required to produce one unit. 3. **Total Direct Labor-Hours Needed:** This row calculates the total number of direct labor hours required each quarter by multiplying the required production by the direct labor-hours per unit. 4. **Direct Labor Cost per Hour:** This row displays the cost for one hour of direct labor. 5. **Total Direct Labor Cost:** This represents the total cost of direct labor for each quarter and for the entire year, calculated by multiplying the total direct labor-hours needed by the direct labor cost per hour. All values are currently placeholders, indicated by question marks (?).
**Budgeted Unit Sales and Production Data Overview** This table presents an overview of budgeted unit sales across different quarters, along with associated production data and financial metrics: ### Sales Data - **Year 2 Quarter 1**: 40,000 units - **Year 2 Quarter 2**: 60,000 units - **Year 2 Quarter 3**: 100,000 units - **Year 2 Quarter 4**: 50,000 units - **Year 3 Quarter 1**: 70,000 units - **Year 3 Quarter 2**: 80,000 units ### Financial and Production Metrics - **Selling Price per Unit**: $12 - **Accounts Receivable, Beginning Balance**: $65,000 - **Sales Collection**: - 75% collected in the same quarter - 25% collected in the following quarter - **Desired Ending Finished Goods Inventory**: 30% of next quarter's budgeted unit sales ### Inventory and Raw Material Requirements - **Finished Goods Inventory, Beginning**: 12,000 units - **Raw Materials Required per Unit**: 5 pounds - **Desired Ending Inventory of Raw Materials**: 10% of next quarter's production needs - **Raw Materials Inventory, Beginning**: 23,000 pounds - **Raw Material Costs**: $0.80 per pound ### Payment and Labor - **Raw Materials Purchases Payment**: - 60% in the current quarter - 40% in the following quarter - **Accounts Payable for Raw Materials, Beginning Balance**: $81,500 - **Direct Labor Costs**: - Cost: $15 per hour - Time: 0.2 hour per unit ### Other Costs - **Variable Manufacturing Overhead (MOH) Rate**: $2 per hour - **Total Fixed MOH**: $60,000 - **Variable Selling & Administrative (S&A) Expense Rate**: $1.80 per unit ### Financial Policies - **Minimum Cash Balance**: $50,000 - **Annual Interest Rate**: 12% This data is crucial for budgeting and forecasting in manufacturing and sales planning, ensuring adequate resource allocation and financial management.
Transcribed Image Text:**Budgeted Unit Sales and Production Data Overview** This table presents an overview of budgeted unit sales across different quarters, along with associated production data and financial metrics: ### Sales Data - **Year 2 Quarter 1**: 40,000 units - **Year 2 Quarter 2**: 60,000 units - **Year 2 Quarter 3**: 100,000 units - **Year 2 Quarter 4**: 50,000 units - **Year 3 Quarter 1**: 70,000 units - **Year 3 Quarter 2**: 80,000 units ### Financial and Production Metrics - **Selling Price per Unit**: $12 - **Accounts Receivable, Beginning Balance**: $65,000 - **Sales Collection**: - 75% collected in the same quarter - 25% collected in the following quarter - **Desired Ending Finished Goods Inventory**: 30% of next quarter's budgeted unit sales ### Inventory and Raw Material Requirements - **Finished Goods Inventory, Beginning**: 12,000 units - **Raw Materials Required per Unit**: 5 pounds - **Desired Ending Inventory of Raw Materials**: 10% of next quarter's production needs - **Raw Materials Inventory, Beginning**: 23,000 pounds - **Raw Material Costs**: $0.80 per pound ### Payment and Labor - **Raw Materials Purchases Payment**: - 60% in the current quarter - 40% in the following quarter - **Accounts Payable for Raw Materials, Beginning Balance**: $81,500 - **Direct Labor Costs**: - Cost: $15 per hour - Time: 0.2 hour per unit ### Other Costs - **Variable Manufacturing Overhead (MOH) Rate**: $2 per hour - **Total Fixed MOH**: $60,000 - **Variable Selling & Administrative (S&A) Expense Rate**: $1.80 per unit ### Financial Policies - **Minimum Cash Balance**: $50,000 - **Annual Interest Rate**: 12% This data is crucial for budgeting and forecasting in manufacturing and sales planning, ensuring adequate resource allocation and financial management.
Expert Solution
Step 1

Budget is defined as the estimated statement prepared by the management in the beginning of the financial year. It is prepared  based upon the current and past financial records and results. Due to the budget the management is able to control the costs and gain higher returns. 

steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Budgeting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS