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E6.3 (LO 3), AP Lexington Company is well known for its high-quality men's shoes. It manufactures all of its products in regional facilities throughout North America, trying to source DM locally when possible. Managers in the production area of one of its plants are beginning to work on next year's first-quarter budgets to ensure they'll have the necessary resources available. Sales are expected to be steady, with 3,500 pairs of shoes (one pair is one unit) budgeted in January. February and March have anticipated sales volume of 3,600 units each, while April will be down slightly to 3,400 units. In order to prevent stock-outs, Lexington's policy requires 15% of the following month's sales be held in ending inventory for all of its shoes. This policy is expected to be met on December 31 of this year. Additional DL and MOH information is as follows. Standard DL time 0.50 hours per unit DL rate $13.00 per DL hour Variable-MOH rate $1.40 per DL hour Fixed-MOH costs Supervisor salaries $4,100 per month Depreciation on plant assets $7,000 per month Insurance and taxes $3,800 per month Required a. Prepare Lexington's production budget for Quarter 1 for this facility. b. Prepare the DL budget for Quarter 1 for this facility. c. Prepare the MOH budget for Quarter 1 for this facility, identifying total MOH costs as well as cash outlay amount for MOH.

E6.3 (LO 3), AP Lexington Company is well known for its high-quality men's shoes. It manufactures all of its products in regional facilities throughout North America, trying to source DM locally when possible. Managers in the production area of one of its plants are beginning to work on next year's first-quarter budgets to ensure they'll have the necessary resources available. Sales are expected to be steady, with 3,500 pairs of shoes (one pair is one unit) budgeted in January. February and March have anticipated sales volume of 3,600 units each, while April will be down slightly to 3,400 units. In order to prevent stock-outs, Lexington's policy requires 15% of the following month's sales be held in ending inventory for all of its shoes. This policy is expected to be met on December 31 of this year. Additional DL and MOH information is as follows. Standard DL time 0.50 hours per unit DL rate $13.00 per DL hour Variable-MOH rate $1.40 per DL hour Fixed-MOH costs Supervisor salaries $4,100 per month Depreciation on plant assets $7,000 per month Insurance and taxes $3,800 per month Required a. Prepare Lexington's production budget for Quarter 1 for this facility. b. Prepare the DL budget for Quarter 1 for this facility. c. Prepare the MOH budget for Quarter 1 for this facility, identifying total MOH costs as well as cash outlay amount for MOH.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter17: Activity Resource Usage Model And Tactical Decision Making
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E6.3 (LO 3), AP Lexington Company is well known for its high-quality men's shoes. It manufactures all of its products in regional facilities throughout North America, trying to source DM locally when possible. Managers in the production area of one of its plants are beginning to work on next year's first-quarter budgets to ensure they'll have the necessary resources available. Sales are expected to be steady, with 3,500 pairs of shoes (one pair is one unit) budgeted in January. February and March have anticipated sales volume of 3,600 units each, while April will be down slightly to 3,400 units. In order to prevent stock-outs, Lexington's policy requires 15% of the following month's sales be held in ending inventory for all of its shoes. This policy is expected to be met on December 31 of this year. Additional DL and MOH information is as follows. Standard DL time DL rate 0.50 hours per unit $13.00 per DL hour Variable-MOH rate $1.40 per DL hour Fixed-MOH costs Supervisor salaries Depreciation on plant assets Insurance and taxes $4,100 per month $7,000 per month $3,800 per month Required a. Prepare Lexington's production budget for Quarter 1 for this facility. b. Prepare the DL budget for Quarter 1 for this facility. c. Prepare the MOH budget for Quarter 1 for this facility, identifying total MOH costs as well as cash outlay amount for MOH. d. In your work, clearly show the connections among these three budgets, identifying which item(s) from the previous budget(s) is (are) needed in the subsequent budgets.
Transcribed Image Text:E6.3 (LO 3), AP Lexington Company is well known for its high-quality men's shoes. It manufactures all of its products in regional facilities throughout North America, trying to source DM locally when possible. Managers in the production area of one of its plants are beginning to work on next year's first-quarter budgets to ensure they'll have the necessary resources available. Sales are expected to be steady, with 3,500 pairs of shoes (one pair is one unit) budgeted in January. February and March have anticipated sales volume of 3,600 units each, while April will be down slightly to 3,400 units. In order to prevent stock-outs, Lexington's policy requires 15% of the following month's sales be held in ending inventory for all of its shoes. This policy is expected to be met on December 31 of this year. Additional DL and MOH information is as follows. Standard DL time DL rate 0.50 hours per unit $13.00 per DL hour Variable-MOH rate $1.40 per DL hour Fixed-MOH costs Supervisor salaries Depreciation on plant assets Insurance and taxes $4,100 per month $7,000 per month $3,800 per month Required a. Prepare Lexington's production budget for Quarter 1 for this facility. b. Prepare the DL budget for Quarter 1 for this facility. c. Prepare the MOH budget for Quarter 1 for this facility, identifying total MOH costs as well as cash outlay amount for MOH. d. In your work, clearly show the connections among these three budgets, identifying which item(s) from the previous budget(s) is (are) needed in the subsequent budgets.
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