Chapter 20, Problem 1PSB

To determine

Material Budget:

This budget shows the quantity of material required to be purchased for meeting the production needs. It also shows the price of the material required to be purchased.

$\text{Direct material budget}=\left(\begin{array}{l}\text{Raw material for production}\\ +\text{Ending raw material}\\ -\text{Opening}\text{raw material}\end{array}\right)$

Labor Budget:

This budget shows the direct labor hours required to produce the desired production quantity and the number of hours needed. It is helpful for the management in planning its labor force requirements.

Production Budget:

It is the budget which provides the details regarding the amount of units to be produced by the entity in order to meet the requisite demand. Formula to calculate production budget,

$\text{Production}\text{budget}=\text{Sales}+\text{Ending inventory}-\text{Opening}\text{inventory}$

Factory Overhead Budget:

It is the budget which contains every cost other than labor and raw material which are incurred by an entity during manufacturing.

1.

To prepare: Production budget for the second quarter.

2.

To determine

To prepare: Direct material budget the second quarter.

(3)

To determine

To prepare: Direct labor budget for the second quarter.

4.

To determine

To prepare: Factory overhead budget for second quarter.