Direct materials are 4 ounces of plastic per kit and the plastic costs $1 per ounce. Indirect materials are considered insignificant and are not included in the budgeting process. Beginning Raw Materials Inventory is 850 ounces, and the company desires to end each quarter with 10% of the materials needed for the next quarter's production. Grady desires a balance of 200 ounces in Raw Materials Inventory at the end of the fourth quarter. Each kit requires 0.10 hours of direct labor at an average cost of $10 per hour. Manufacturing overhead is allocated using direct labor hours as the allocation base. Variable overhead is $0.20 per kit, and fixed overhead is $165 per quarter.
Direct materials are 4 ounces of plastic per kit and the plastic costs $1 per ounce. Indirect materials are considered insignificant and are not included in the budgeting process. Beginning Raw Materials Inventory is 850 ounces, and the company desires to end each quarter with 10% of the materials needed for the next quarter's production. Grady desires a balance of 200 ounces in Raw Materials Inventory at the end of the fourth quarter. Each kit requires 0.10 hours of direct labor at an average cost of $10 per hour. Manufacturing overhead is allocated using direct labor hours as the allocation base. Variable overhead is $0.20 per kit, and fixed overhead is $165 per quarter.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
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A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Transcribed Image Text:Grady, Inc. manufactures model airplane kits and projects production at 650, 500, 450, and 600 kits for the next four quarters.
(Click the icon to view the manufacturing information.)
Prepare Grady's direct materials budget, direct labor budget, and manufacturing overhead budget for the year. Round the direct labor
hours needed for production, budgeted overhead costs, and predetermined overhead allocation rate to two decimal places. Round othe
amounts to the nearest whole number.
Direct Materials Budget
For the Year Ended December 31
First
Quarter
Budgeted kits to be produced
Direct materials (ounces) per kit
Direct materials needed for production
Plus: Desired direct materials in ending inventory
Total direct materials needed
Less: Direct materials in beginning inventory
Budgeted purchases of direct materials
Direct materials cost per ounce
Budgeted cost of direct materials purchases
650
Second
Quarter
500
4
Third
Quarter
450
Fourth
Quarter
600
Total
2,200
Transcribed Image Text:Direct materials are 4 ounces of plastic per kit and the plastic costs $1 per ounce.
Indirect materials are considered insignificant and are not included in the budgeting
process. Beginning Raw Materials Inventory is 850 ounces, and the company
desires to end each quarter with 10% of the materials needed for the next quarter's
production. Grady desires a balance of 200 ounces in Raw Materials Inventory at
the end of the fourth quarter. Each kit requires 0.10 hours of direct labor at an
average cost of $10 per hour. Manufacturing overhead is allocated using direct
labor hours as the allocation base. Variable overhead is $0.20 per kit, and fixed
overhead is $165 per quarter.
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