ECCO Equipment produces exercise equipment. The following schedule reveals anticipated monthly production of bicycles for the first three months of the year: January 10,000 February 14,500 March 12,000 ECCO budgets for three direct labor hours per bicycle, at an average cost of $18 per hour. Variable manufacturing overhead is applied at the rate of $10 per direct labor hour. Fixed overhead is expected to be $110,000 per month, which includes $15,000 per month of noncash expenses related to depreciation. Required: a) Prepare a direct labor budget for the first three months of the year. b) Prepare a manufacturing overhead budget, showing the monthly cash outflow for the first three months of the year. c) Would you refer to the budgets in (a) and (b) static or flexible budgets? Explain.
ECCO Equipment produces exercise equipment. The following schedule reveals anticipated monthly production of bicycles for the first three months of the year: January 10,000 February 14,500 March 12,000 ECCO budgets for three direct labor hours per bicycle, at an average cost of $18 per hour. Variable manufacturing overhead is applied at the rate of $10 per direct labor hour. Fixed overhead is expected to be $110,000 per month, which includes $15,000 per month of noncash expenses related to depreciation. Required: a) Prepare a direct labor budget for the first three months of the year. b) Prepare a manufacturing overhead budget, showing the monthly cash outflow for the first three months of the year. c) Would you refer to the budgets in (a) and (b) static or flexible budgets? Explain.
Chapter1: Financial Statements And Business Decisions
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Master Budget
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.
Sales Budget and Selling
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.
Question
ECCO Equipment produces exercise equipment. The following schedule reveals anticipated monthly production of bicycles for the first three months of the year:
January 10,000
February 14,500
March 12,000
ECCO budgets for three direct labor hours per bicycle, at an average cost of $18 per hour. Variable manufacturing overhead is applied at the rate of $10 per direct labor hour. Fixed overhead is expected to be $110,000 per month, which includes $15,000 per month of noncash expenses related to depreciation.
Required:
a) Prepare a direct labor budget for the first three months of the year.
b) Prepare a manufacturing overhead budget, showing the monthly cash outflow for the first three months of the year.
c) Would you refer to the budgets in (a) and (b) static or flexible budgets? Explain.
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