Managerial Accounting
Managerial Accounting
7th Edition
ISBN: 9781260247886
Author: Wild
Publisher: MCG
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Chapter 7, Problem 15E

(1)

To determine

To prepare: Direct material budget for September, October.

(1)

Expert Solution
Check Mark

Explanation of Solution

Given,
September,
Production units are 4,600.
Raw material required per unit 2 pounds.
Opening raw material is 3,680 units.
October,
Production units are 6,200.
Raw material required per unit 2 pounds.
November,
Production units are 5,800 units.

    Direct Material Budget
    Particulars September October
    Production (units) 4,600 6,200
    Raw material required (pounds) (working note) 9,200 12,400
    Add: Ending raw material (working note) 4,960 4,640
    Less: Opening raw material 3,680 4,960
    Total material required (pounds) [A] 10,480 12,080
    Purchase cost [B] 4 4
    Total Purchase Cost ($) [ A×B ] 49,920 48,320
    Table (1)

Working notes:

Formula to compute raw material required,

Raw material required=Production×Raw material required per unit

For September,

Substitute 4,600 units for production and 2 pounds for raw material required per unit.

Raw material required=4,600units×2pounds =9,200pounds

For October,

Substitute 6,200 units for production and 2 pounds for raw material required per unit.

Raw material required=6,200units×2pounds =12,400pounds

November’s material requirement,

    Raw material required=Production×Raw material required per unit

Substitute 5,800 for production and 2 pounds for raw material required per unit.

Raw material required=5,800units×2pounds =11,600pounds

Formula to compute ending raw material,

    Endingraw material=40%×Nextquarter'smaterialrequirement

For September,

Substitute 12,400 for third October’s material requirement,

Endingraw material=40%×12,400units =4,960units

For October,

Substitute 11,600 for November’s material requirement,

Endingraw material=40%×11,600units =4,640units

(2)

To determine

To prepare: Direct labor budget for September, October.

(2)

Expert Solution
Check Mark

Explanation of Solution

Given,

September,
Production is 4,600 units.
Labor rate per hour is $16.
Labor hours per unit are 0.8.
October,
Production is 6,200 units.
Labor rate per hour is $16.
Labor hours per unit are 0.8.

    Direct Labor Budget
    Particulars September October
    Production(units) [ A ] 4,600 6,200
    Hours required per unit [ B ] 0.8 0.8
    Total hours required [ A×B ] 3,680 4,960
    Labor rate per hour 16 16
    Total labor cost($)[working note] 58,880 79,360
    Table (2)

Working note:

Formula to compute total labor cost,

Total labor cost=Total hours required×Labor rate per hour

For September,

Substitute 3,680 hours for total hours required and $16 for labor rate per hour.

Total labor cost=3,680 hours×$16 =$58,880

For October,

Substitute 4,960 hours for total hours required and $16 for labor rate per hour.

Total labor cost=4,960 hours×$16 =$79,360

(3)

To determine

To prepare: Factory overhead budget for September, October.

(3)

Expert Solution
Check Mark

Explanation of Solution

    Factory Overhead Budget
    Particulars September October
    Total labor hours required (From part 2) [ A ] 3,680 4,960
    Application rate per labor hour ($) [ B ] 2 2
    Variable overheads ($) [ A×B ] 7,360 9,920
    Add: Fixed overheads (given) 10,000 10,000
    Total factory overheads 17,360 19,920
    Table (3)

Hence, Direct material budget of September is $49,920, October.$48,320.
Direct labor budget of September is $58,880, October.$79,360.
Factory Overhead Budget of September is $17,360, October.$19,920.

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Chapter 7 Solutions

Managerial Accounting

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