May Company produces a variety of labels, including iron-on name labels, which are sold to parents of camp-bound children. (The camps require campers to have their name on every article of clothing.) Each roll consists of 25 yards of paper strip with 1,000 copies of the child’s name. Each yard of paper strip costs $0.30. Manning has budgeted production of the label rolls for the next four months as follows: Rolls in Units March 20,000 April 60,000 May 100,000 June 12,000 Inventory policy requires that sufficient paper strip be in ending monthly inventory to satisfy 20 percent of the following month’s production needs. The inventory of paper strip at the beginning of March equals exactly the amount needed to satisfy the inventory policy. Required 1. Prepare a direct material purchases budget for March, April, and May showing purchases in units and in dollars for each month and in total. 2. Each roll of labels produced requires (on average) 0.04 direct labor hour. The average cost of direct labor is $12 per hour. Prepare a direct labor budget for March, April, and May showing the hours needed and the direct labor cost for each month and in total.
May Company produces a variety of labels, including iron-on name labels, which are sold to parents of camp-bound children. (The camps require campers to have their name on every article of clothing.) Each roll consists of 25 yards of paper strip with 1,000 copies of the child’s name. Each yard of paper strip costs $0.30. Manning has budgeted production of the label rolls for the next four months as follows:
Rolls in Units
March 20,000
April 60,000
May 100,000
June 12,000
Inventory policy requires that sufficient paper strip be in ending monthly inventory to satisfy 20 percent of the following month’s production needs. The inventory of paper strip at the beginning of March equals exactly the amount needed to satisfy the inventory policy.
Required
1. Prepare a direct material purchases budget for March, April, and May showing purchases in units and in dollars for each month and in total.
2. Each roll of labels produced requires (on average) 0.04 direct labor hour. The average cost of direct labor is $12 per hour. Prepare a direct labor budget for March, April, and May showing the hours needed
and the direct labor cost for each month and in total.
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