Sanders Swimwear, Inc., produces swimsuits. The following information is to be used for the operating budget this coming year. o Average sales price for each swimsuit is estimated to be OMR50. Unit sales for this coming year ending December 31 are expected to be as follows: Quarter. Sales (Units) 1st. 5000 2nd. 6000 3rd. 6500 4th. 7500 Finished goods inventory is maintained at a level equal to 10 percent of the next quarter’s sales. Finished goods inventory at the end of the fourth quarter budget period is estimated to be 400 units. o Each unit of product requires 3 yards of direct materials, at a cost of OMR4 per yard. Management prefers to maintain ending raw materials inventory equal to 20 percent of next quarter’s materials needed in production. Raw materials inventory at the end of the fourth quarter budget period is estimated to be 9,500 yards. Each unit of product requires 0.5 direct labor hours at a cost of OMR12 per hour. o Variable manufacturing overhead costs are: Indirect Materials OMR 0.60 per unit Indirect Labour OMR 3.50 per unit Others OMR 2.80 per unit Fixed manufacturing overhead costs per quarter are: Salaries OMR 30,000 Other OMR 5,000 Depreciation OMR 9,330 c. Prepare a direct materials purchases budget d. Prepare a direct labor budget e. Prepare a manufacturing overhead budget .

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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Sanders Swimwear, Inc., produces swimsuits. The following information is to be used for the operating budget this coming year. o Average sales price for each swimsuit is estimated to be OMR50. Unit sales for this coming year ending December 31 are expected to be as follows: Quarter. Sales (Units) 1st. 5000 2nd. 6000 3rd. 6500 4th. 7500 Finished goods inventory is maintained at a level equal to 10 percent of the next quarter’s sales. Finished goods inventory at the end of the fourth quarter budget period is estimated to be 400 units. o Each unit of product requires 3 yards of direct materials, at a cost of OMR4 per yard. Management prefers to maintain ending raw materials inventory equal to 20 percent of next quarter’s materials needed in production. Raw materials inventory at the end of the fourth quarter budget period is estimated to be 9,500 yards. Each unit of product requires 0.5 direct labor hours at a cost of OMR12 per hour. o Variable manufacturing overhead costs are: Indirect Materials OMR 0.60 per unit Indirect Labour OMR 3.50 per unit Others OMR 2.80 per unit Fixed manufacturing overhead costs per quarter are: Salaries OMR 30,000 Other OMR 5,000 Depreciation OMR 9,330 c. Prepare a direct materials purchases budget d. Prepare a direct labor budget e. Prepare a manufacturing overhead budget .

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