The Chicago power plant that services all manufacturing departments of MidWest
Engineering has a budget for the coming year. This budget has been expressed in the
following monthly terms:
Manufacturing Needed at Practical Capacity Average Expected Monthly
Department Production Level (Kilowatt- Usage) (Kilowatt-Hours)
Rockford 10,000 8,000
Peoria 20,000 9,000
Hammond 12,000 7,000
Kankakee 8,000 6,000
Total 50,000 30,000
The expected monthly costs for operating the power plant during the budget year are $15,000:
$6,000 variable and $9,000 fixed.
Required:
1. Assume that a single cost pool is used for the power plant costs.
What budgeted amounts will be allocated to each manufacturing department if:
(a) the rate is calculated based on practical capacity and costs are allocated based on
practical capacity, and
(b) the rate is calculated based on expected monthly usage and costs are allocated based
on expected monthly usage?
2. Assume the dual-rate method is used with separate cost pools for the variable and
fixed costs. Variable costs are allocated on the basis of expected monthly usage.
Fixed costs are allocated on the basis of practical capacity.
(a) What budgeted amounts will be allocated to each manufacturing department?
(b) Why might you prefer the dual-rate method?
Step by stepSolved in 2 steps
- The production manager of Rordan Corporation has submitted the following quarterly production forecast for the upcoming fiscal year: 1st Quarter 8,000 2nd Quarter 3rd Quarter 7,000 4th Quarter Units to be produced 6,500 7,500 Each unit requires 0.35 direct labor-hours, and direct laborers are paid $15.00 per hour. Required: 1. Prepare the company's direct labor budget for the upcoming fiscal year. (Round "Direct labor time per unit (hours)" answers to 2 decimal places.) Rordan Corporation Direct Labor Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Direct labor time per unit (hours) Total direct labor-hours needed Direct labor cost per hour Total direct labor costarrow_forwardSubject: acountingarrow_forwardVariable Costs Total Variable Costs Depreciation Supervision Total Costs Total Fixed Costs Direct Labor Activity Level Direct Materials Fixed Costs Finished Units Overheadarrow_forward
- Sweet Acacia Company is preparing its manufacturing overhead budget for 2022. Relevant data are as follows: 1. Units to be produced (by quarters): 9,700, 12,000, 15,100,17,600 2. Direct labour: 1.4 hours per unit 3. Variable overhead costs per direct labour hour: indirect materials $0.70; indirect labour $1.10; and maintenance $0.50 4. Fixed overhead costs per quarter: supervisory salaries $34,900; depreciation $16,400; and maintenance $15,500 Prepare the manufacturing overhead budget for the year, showing quarterly data. (Round variable cost per unit to 2 decimal places, e.g. 15.25.) SWEET ACACIA COMPANY Manufacturing Overhead Budget For the Year Ending December 31, 2022 1 2 Quarter $ $ $ $ $ $ $ $ $ $ Yeararrow_forwardRodriguez, Inc., is preparing its direct labor budget for 2020 from the following production budget based on a calendar year. Quarter Units Quarter 3 1 2 20,000 25,000 4 Units 35,000 30,000 Each unit requires 1.50 hours of direct labor. Prepare a direct labor budget for 2020. Wage rates are expected to be $16 for the first 2 quarters and $18 for quarters 3 and 4. (Round Direct labor time per unit answers to 2 decimal places, eg. 52.50.) $ $ RODRIQUEZ, INC. Direct Labor Budget 2 Quarter $ $ 3 $ $ 4 Yeararrow_forwardPrepare a direct labor budget for each of the upcoming five years. Cost labor per unit = $8 Total direct labor hours needed for a period = Number of units to be produced in that period * Direct labors hours needed per unit Total direct labor costs needed to meet production =Total direct labor hours needed for that period * Direct labor cost per hourarrow_forward
- Blossom Company expects to produce 1,200,000 units of product XX in 2022. Monthly production is expected to range from 70,000 to 100,000 units. Budgeted variable manufacturing costs per unit are as follows: direct materials $3, direct labour $6, and overhead $9. Budgeted fixed manufacturing costs per unit for depreciation are $4 and for supervision $1. Prepare a flexible manufacturing budget for the relevant range value using increments of 15,000 units. (List variable costs before fixed costs.) BLOSSOM COMPANY Monthly Flexible Manufacturing Budget $ $ $arrow_forwardAlso include the total of the six monthsarrow_forwardanswer in text form please (without image)arrow_forward
- Sheridan Company has accumulated the following budget data for the year 2022. 1. 2. 3. 4. 5. Sales: 31,220 units, unit selling price $86. Cost of one unit of finished goods: direct materials 1 pound at $5 per pound, direct labor 3 hours at $13 per hour, and manufacturing overhead $8 per direct labor hour. Inventories (raw materials only): beginning, 10.120 pounds; ending. 15.390 pounds. Selling and administrative expenses: $170.000; interest expense: $30,000. Income taxes: 20% of income before income taxes.arrow_forwardSunland Company has accumulated the following budget data for the year 2027. 1. 2. 3. 4. 5. Sales: 31,450 units, unit selling price $85. Cost of one unit of finished goods: direct materials 1 pound at $5 per pound, direct labor 3 hours at $13 per hour, and manufacturing overhead $6 per direct labor hour. Inventories (raw materials only): beginning, 10,290 pounds; ending, 15,250 pounds. Selling and administrative expenses: $170,000; interest expense: $30,000. Income taxes: 20% of income before income taxes.arrow_forwardThe production department of Headstrong Company has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year: 1st Quarter 2nd Quarter 3rd Quarter 4th G Quarter Units to be produced 7,000 8,000 6,000 5.000 In addition, the beginning raw materials inventory for the first quarter is budgeted to be 1,400 kilograms and the beginning accounts payable for the first quarter are budgeted to be $2,940. Each unit requires two kilograms of raw material that costs $1.40 per kilogram. Management desires to end each quarter with an inventory of raw materials equal to 10% of the following quarter's production needs. The desired ending inventory for the fourth quarter is 1, 500 kilograms. Management plans to pay for 80% of raw material purchases in the quarter acquired and 20% in the following quarter. Each unit requires 0.60 direct labour - hours, and direct labour - hour workers are paid $14 per hour. Required: 1. Prepare the company's direct materials budget…arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education