Managerial Accounting
Managerial Accounting
6th Edition
ISBN: 9781259726972
Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 7, Problem 16E

(1)

To determine

To prepare: Direct material budget for March, April.

(1)

Expert Solution
Check Mark

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 ($) [ A×B ] 227,840 296,960
    Table (1)

Working notes:

Formula to compute raw material required,

    Raw material required=Production×Raw material required per unit

For March,

Substitute 3,300 units for production and 8 pounds for raw material required per unit.

    Raw material required=3,300units×8pounds =26,400pounds

For April,

Substitute 4,600 units for production and 8 pounds for raw material required per unit.

    Raw material required=4,600units×8pounds =36,800pounds

May’s material requirement,

    Raw material required=Production×Raw material required per unit

Substitute 4,800 for production and 8 pounds for raw material required per unit.

    Raw material required=4,800units×8pounds =38,400pounds

Formula to compute ending raw material,

    Endingraw material=20%×Nextquarter'smaterialrequirement

For March,

Substitute 36,800 for third October’s material requirement,

    Endingraw material=20%×36,800units =7,360units

For April,

Substitute 38,400 for May’s material requirement,

    Endingraw material=20%×38,400units =7,680units

(2)

To determine

To prepare: Production budget for March, April.

(2)

Expert Solution
Check Mark

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) [ A ] 3,300 4,600
    Hours required per unit [ B ] 0.5 0.5
    Total hours required [ A×B ] 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,

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

For March,

Substitute 1,650 hours for total hours required and $18 for labor rate per hour.

    Total labor cost=1,650 hours×$18 =$29,700

For April,

Substitute 2,300 hours for total hours required and $18 for labor rate per hour.

    Total labor cost=2,300 hours×$18 =$41,400

(3)

To determine

To Prepare: Factory overhead budget for March, April.

(3)

Expert Solution
Check Mark

Explanation of Solution

    Factory Overhead Budget
    Particulars March April
    Total labor hours required (From part 2) [ A ] 1,650 2,300
    Application rate per labor hour ($) [ B ] 3 3
    Variable overheads($) [ A×B ] 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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