P6.3 (LO 1, 2, 3), AP Excel Lavish Towel Company completely stocked out of its cotton yarn for making towels in April (last month). So management is starting over, trying to build up an inventory of yarn while ensuring there is enough yarn on hand for the production group to catch up with orders. Phyllis is responsible for putting all operating budgets together to estimate operating income for May. Here is the information she has. Additional information: May June July Budgeted sales in units 6,000 6,200 5,800 Budgeted selling price Target ending FG Inventory Beginning FG Inventory Target ending DM Inventory Beginning DM Inventory Budgeted DM usage and cost Budgeted DL usage and cost Budgeted variable-MOH costs Budgeted fixed-MOH costs Budgeted variable SG&A costs Budgeted fixed SG&A costs $6 per unit 15% of next month's sales volume. 300 units, at a total cost of $1,170 (based on prior period costs) 20% of next month's production needs 0 25 yards per unit at a cost of $0.04 per yard 0.1 DL hours per unit at a cost of $15 per hour $0.50 per unit $6,000 total (including $500 of depreciation) $0.40 per unit sold $7,000 total (including $800 of depreciation) Required a. Prepare the following operating budgets for Lavish Towel for the month of May. 1. Sales forecast. 2. Production budget. 3. DM purchases budget.
P6.3 (LO 1, 2, 3), AP Excel Lavish Towel Company completely stocked out of its cotton yarn for making towels in April (last month). So management is starting over, trying to build up an inventory of yarn while ensuring there is enough yarn on hand for the production group to catch up with orders. Phyllis is responsible for putting all operating budgets together to estimate operating income for May. Here is the information she has. Additional information: May June July Budgeted sales in units 6,000 6,200 5,800 Budgeted selling price Target ending FG Inventory Beginning FG Inventory Target ending DM Inventory Beginning DM Inventory Budgeted DM usage and cost Budgeted DL usage and cost Budgeted variable-MOH costs Budgeted fixed-MOH costs Budgeted variable SG&A costs Budgeted fixed SG&A costs $6 per unit 15% of next month's sales volume. 300 units, at a total cost of $1,170 (based on prior period costs) 20% of next month's production needs 0 25 yards per unit at a cost of $0.04 per yard 0.1 DL hours per unit at a cost of $15 per hour $0.50 per unit $6,000 total (including $500 of depreciation) $0.40 per unit sold $7,000 total (including $800 of depreciation) Required a. Prepare the following operating budgets for Lavish Towel for the month of May. 1. Sales forecast. 2. Production budget. 3. DM purchases budget.
Cornerstones of Cost Management (Cornerstones Series)
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ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
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Chapter2: Basic Cost Management Concepts
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Transcribed Image Text:P6.3 (LO 1, 2, 3), AP Excel Lavish Towel Company completely stocked out of its cotton yarn for making towels in April (last month). So management is starting over, trying to
build up an inventory of yarn while ensuring there is enough yarn on hand for the production group to catch up with orders. Phyllis is responsible for putting all operating
budgets together to estimate operating income for May. Here is the information she has.
Additional information:
May June July
Budgeted sales in units 6,000 6,200 5,800
Budgeted selling price
Target ending FG Inventory
Beginning FG Inventory
Target ending DM Inventory
Beginning DM Inventory
Budgeted DM usage and cost
Budgeted DL usage and cost
Budgeted variable-MOH costs
Budgeted fixed-MOH costs
Budgeted variable SG&A costs
Budgeted fixed SG&A costs
$6 per unit
15% of next month's sales volume
300 units, at a total cost of $1,170 (based on prior period costs)
20% of next month's production needs
0
25 yards per unit at a cost of $0.04 per yard
0.1 DL hours per unit at a cost of $15 per hour
$0.50 per unit
$6,000 total (including $500 of depreciation)
$0.40 per unit sold
$7,000 total (including $800 of depreciation)
Required
a. Prepare the following operating budgets for Lavish Towel for the month of May.
1. Sales forecast.
2. Production budget.
3. DM purchases budget.
4. DL budget.
5. MOH budget.
6. SG&A budget.
b. Prepare the budgeted COGS schedule and income statement for May. Assume there is no beginning or ending WIP Inventory in May. Lavish uses the FIFO method for
inventory valuation.
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