**Educational Website Transcription:**---**Title:** Budget Preparation for Model Airplane Kit Production**Overview:**This exercise involves creating budgets for a company named Preston, Inc., which manufactures model airplane kits. The production is projected at 500, 420, 350, and 400 kits for the next four quarters.---### Preston, Inc. Model Airplane Kit Production Budget**Instructions:**Follow these steps to prepare Preston's direct materials budget, direct labor budget, and manufacturing overhead budget for the year. 1. **Estimating Production:** - First Quarter: 500 kits - Second Quarter: 420 kits - Third Quarter: 350 kits - Fourth Quarter: 400 kits2. **Direct Materials Budget:** - Determine direct materials cost per kit. - Calculate the total direct materials required for production.3. **Beginning & Ending Inventory:** - Specify the desired direct materials in ending inventory. - Note the direct materials available in the beginning inventory.4. **Total Calculation:** - Compute the total direct materials needed. - Calculate the direct materials to be purchased. - Specify the direct materials cost per purchase. - Determine the budgeted cost of direct materials purchases.**Template for Direct Materials Budget:****Preston, Inc.****Direct Materials Budget****For the Year Ended December 31**| **Quarter** | **First Quarter** | **Second Quarter** | **Third Quarter** | **Fourth Quarter** | **Total** ||-------------------|-------------------|--------------------|-------------------|--------------------|------------------|| **Budgeted kits to be produced** | | | | | || **Direct materials (ounces) per kit** | | | | | || **Total materials needed for production** | | | | | || **Plus: Desired direct materials in ending inventory** | | | | | || **Total direct materials needed** | | | | | || **Less: Direct materials in beginning inventory** | | | | | || **Direct materials to be purchased** | | | | | || **Direct materials cost per ounce** | | | | ### Manufacturing Budgeting for Model Airplane Kits**Company Overview:**Preston, Inc. specializes in the production of model airplane kits. The company forecasts the production quantities for the upcoming four quarters as follows:- Q1: 500 kits- Q2: 420 kits- Q3: 350 kits- Q4: 400 kits**Objective:**Prepare Preston’s:1. Direct materials budget2. Direct labor budget3. Manufacturing overhead budget for the year**Instruction Notice:**For the direct labor hours necessary for production, budgeted overhead costs, and the predetermined overhead allocation rate, round all amounts to the nearest whole number. However, for the allocation rate, round to two decimal places.**Supplementary Information:**A pop-up box provides critical data needed for budgeting purposes:1. **Direct Materials:** - Each kit requires 5 ounces of plastic. - Cost of plastic: $1 per ounce. - Indirect materials are minimal and not accounted for in the budget.2. **Inventory Information:** - Ending Raw Materials Inventory: 910 ounces. - Desired inventory at the end of each quarter: 15% of the materials needed for the upcoming quarter’s production.3. **Initial Inventory:** - There is a balance of 200 ounces in Raw Materials Inventory at the beginning of the fourth quarter.4. **Direct Labor:** - Each kit necessitates 0.50 hours of labor. - Average labor cost: $25 per hour.5. **Manufacturing Overhead:** - Allocation uses direct labor hours as the base. - Variable overhead rate: $0.75 per labor hour. - Fixed overhead: $135 per quarter.**Graph/Table Explanation:**The image contains a table where users will input the budgeted amounts derived from the calculations based on the provided data. This comprehensive chart format assists in organizing the budget for direct materials purchases, direct labor costs, and manufacturing overhead allocations across the four quarters of the fiscal year.By accurately completing these sections, Preston, Inc. ensures a streamlined and efficient production budgeting process, aligning costs and resources with the projected output.

Budgeting: It is a process of planning the work to be performed. Under this process a formal plan is…

Preston, Inc. manufactures model airplane kits and projects production at 500, 420, 350, and 400 kits for the next four quarters. (Click the loon to view the manufacturing information) Prepare Preston'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 other amounts to the nearest whole number. Begin by preparing Preston's direct materials budget. Budgeted kits to be produced Direct materials (ounces) per k Direct materials needed for production Preston, Inc. Direct Materials Budget For the Year Ended December 31 First Second Quarter Quarter Plus Desired direct materials in ending inventory Total direct materials needed Less Direct materials in beginning inventory Budgeted purchases of direct materials Direct matenals cost per ounce Third Quarter Fourth Quarter Total F Question View

Preston, Inc. manufactures model airplane kits and projects production at 500, 420, 350, and 400 kits for the next four quarters. (Click the loon to view the manufacturing information) Prepare Preston'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 other amounts to the nearest whole number. Begin by preparing Preston's direct materials budget. Budgeted kits to be produced Direct materials (ounces) per k Direct materials needed for production Preston, Inc. Direct Materials Budget For the Year Ended December 31 First Second Quarter Quarter Plus Desired direct materials in ending inventory Total direct materials needed Less Direct materials in beginning inventory Budgeted purchases of direct materials Direct matenals cost per ounce Third Quarter Fourth Quarter Total F Question View

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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