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Concept explainers
(1)
To prepare: Direct material budget for March, April.
(1)
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Explanation of Solution
Given,
March,
Production units are 3,300.
Raw material required per unit 8 pounds.
Opening raw material is 5,280 units.
April,
Production units are 4,600.
Raw material required per unit 8 pounds.
May,
Production units are 4,800 units.
Direct Material Budget | ||
Particulars | March | April |
Production (units) | 3,300 | 4,600 |
Raw material required (pounds) (working note) | 26,400 | 36,800 |
Add: Ending raw material (working note) | 7,360 | 7,680 |
Less: Opening raw material | 5,280 | 7,360 |
Total material required (pounds) [A] | 28,480 | 37,120 |
Purchase cost [B] | 8 | 8 |
Total Purchase Cost ($) | 227,840 | 296,960 |
Table (1) |
Working notes:
Formula to compute raw material required,
For March,
Substitute 3,300 units for production and 8 pounds for raw material required per unit.
For April,
Substitute 4,600 units for production and 8 pounds for raw material required per unit.
May’s material requirement,
Substitute 4,800 for production and 8 pounds for raw material required per unit.
Formula to compute ending raw material,
For March,
Substitute 36,800 for third October’s material requirement,
For April,
Substitute 38,400 for May’s material requirement,
(2)
To prepare: Production budget for March, April.
(2)
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Explanation of Solution
Given,
March,
Production is 3,300 units.
Labor rate per hour is $18.
Labor hours per unit are 0.5.
April,
Production is 4,600 units.
Labor rate per hour is $18.
Labor hours per unit are 0.5.
Direct Labor Budget | ||
Particulars | March | April |
Production (units) | 3,300 | 4,600 |
Hours required per unit | 0.5 | 0.5 |
Total hours required | 1,650 | 2,300 |
Labor rate per hour | 18 | 18 |
Total labor cost ($) [working note] | 29,700 | 41,400 |
Table (2) |
Working note:
Formula to compute total labor cost,
For March,
Substitute 1,650 hours for total hours required and $18 for labor rate per hour.
For April,
Substitute 2,300 hours for total hours required and $18 for labor rate per hour.
(3)
To Prepare: Factory
(3)
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Explanation of Solution
Factory Overhead Budget | ||
Particulars | March | April |
Total labor hours required (From part 2) | 1,650 | 2,300 |
Application rate per labor hour ($) | 3 | 3 |
Variable overheads($) | 4,950 | 6,900 |
Add: Fixed overheads (given) | 4,000 | 4,000 |
Total factory overheads | 8,950 | 10,900 |
Table (3) |
Hence, Direct material budget of March is $227,840, April.$296,960.
Direct labor budget of March is $29,700, April.$41,400.
Factory Overhead Budget of March is $8,950, April.$10,900.
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Chapter 7 Solutions
Managerial Accounting
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