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 1PSB
To determine

Material Budget:

This budget shows the quantity of material required to be purchased for meeting the production needs. It also shows the price of the material required to be purchased.

    Direct material budget=( Raw material for production +Ending raw material Openingraw material )

Labor Budget:

This budget shows the direct labor hours required to produce the desired production quantity and the number of hours needed. It is helpful for the management in planning its labor force requirements.

Production Budget:

It is the budget which provides the details regarding the amount of units to be produced by the entity in order to meet the requisite demand. Formula to calculate production budget,

    Productionbudget=Sales+Ending inventoryOpeninginventory

Factory Overhead Budget:

It is the budget which contains every cost other than labor and raw material which are incurred by an entity during manufacturing.

1.

To prepare: Production budget for the second quarter.

Expert Solution
Check Mark

Explanation of Solution

Given,
Second quarter,
Sale is 250,000 units.
Opening inventory is 8,000 units.
Ending inventory is 6,000 units.

    Production Budget
    Particulars Second quarter (units)
    Sales 250,000
    Add: Ending inventory 6,000
    Less: Opening inventory 8,000
    Production 248,000
    Table(1)

Hence, budgeted production is 248,000 units.

2.

To determine

To prepare: Direct material budget the second quarter.

2.

Expert Solution
Check Mark

Explanation of Solution

Second quarter,
Production units are 248,000. (From part 1)
Raw material required per unit 3 pounds. (Given)
Opening raw material is 15,000 units. (Given)
Ending raw material is 12,000 pounds. (Given)
Purchase cost is $4.

    Direct Material Budget
    Particulars Second quarter
    Production (units) 248,000
    Raw material required (pounds) (working note) 744,000
    Add: Ending raw material (given) 12,000
    Less: Opening raw material(given) 15,000
    Total material required (pounds) [A] 741,000
    Purchase cost ($) [B] 4
    Total purchase cost ($) [ A×B ] 2,964,000
    Table(2)

Working notes:

Formula to compute raw material required,

    Raw material required=Production×Raw material required per unit

For Second quarter,

Substitute 248,000 units for production and 3 pounds for raw material required per unit.

    Raw material required=248,000units×3pounds =744,000 pounds

(3)

To determine

To prepare: Direct labor budget for the second quarter.

(3)

Expert Solution
Check Mark

Explanation of Solution

Second quarter,
Production units are 248,000. (From part 1)
Labor rate per hour is $18. (Given)
Labor hours per unit are 0.5. (Given)

    Direct Labor Budget
    Particulars Second quarter
    Production (units) [ A ] 248,000
    Hours required per unit [ B ] 0.5
    Total hours required [ A×B ] 124,000
    Labor rate per hour 18
    Total labor cost ($) [working note] 2,232,000
    Table(3)

Working note:

Formula to compute total labor cost,

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

For Second quarter,

Substitute 124,000 units for total hours required and 18 for labor rate per hour.

    Total labor cost=124,000 hours×$18 =$2,232,000

4.

To determine

To prepare: Factory overhead budget for second quarter.

4.

Expert Solution
Check Mark

Explanation of Solution

    Factory Overhead Budget
    Particulars Second quarter
    Total labor hours required (From part 3) [ A ] 124,000
    Application rate of variable overheads per labor hour ($) [ B ] 12
    Variable overheads ($) [ A×B ] 1,488,000
    Add: Fixed overheads 1,776,000
    Total factory overheads 3,264,000
    Table(4)

Hence, production budget of second quarter is 248,000 units, direct labor budget of second quarter is $1,485,000. direct material budget of second quarter is $4,425,000. factory overhead budget of second quarter is $3,264,000.

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Chapter 7 Solutions

Managerial Accounting

Ch. 7 - How does budgeting help management coordinate and...Ch. 7 - Why is the sales budget so important to the...Ch. 7 - What is the selling expense budget? What is the...Ch. 7 - Prob. 9DQCh. 7 - GOOGLE Google prepares a cash budget. What is a...Ch. 7 - Prob. 11DQCh. 7 - Prob. 12DQCh. 7 - Prob. 13DQCh. 7 - Prob. 14DQCh. 7 - Coca-cola recently redesigned its bottle to reduce...Ch. 7 - Activity-based budgeting is a budget system based...Ch. 7 - Budget motivation C1 For each of the following...Ch. 7 - Budgeting benefits C1 For each of the following...Ch. 7 - Prob. 3QSCh. 7 - Prob. 4QSCh. 7 - Prob. 5QSCh. 7 - Prob. 6QSCh. 7 - Prob. 7QSCh. 7 - Prob. 8QSCh. 7 - Prob. 9QSCh. 7 - Prob. 10QSCh. 7 - Prob. 11QSCh. 7 - Prob. 12QSCh. 7 - Prob. 13QSCh. 7 - Prob. 14QSCh. 7 - Prob. 15QSCh. 7 - Manufacturing: Production budget P1 Atlantic Surf...Ch. 7 - Prob. 17QSCh. 7 - Prob. 18QSCh. 7 - Prob. 19QSCh. 7 - Cash receipts, with uncollectible accounts P2 The...Ch. 7 - Cash receipts, with uncollectible accounts P2 Well...Ch. 7 - Prob. 22QSCh. 7 - Budgeted loan activity P2 Santos Co. is preparing...Ch. 7 - Prob. 24QSCh. 7 - Prob. 25QSCh. 7 - Prob. 26QSCh. 7 - Prob. 27QSCh. 7 - Prob. 28QSCh. 7 - Prob. 29QSCh. 7 - Prob. 30QSCh. 7 - Prob. 31QSCh. 7 - Prob. 1ECh. 7 - Prob. 2ECh. 7 - Prob. 3ECh. 7 - Prob. 4ECh. 7 - Exercise 20-5 Manufacturing: Direct labor budget...Ch. 7 - Prob. 6ECh. 7 - Prob. 7ECh. 7 - Prob. 8ECh. 7 - Prob. 9ECh. 7 - Prob. 10ECh. 7 - Prob. 11ECh. 7 - Prob. 12ECh. 7 - Prob. 13ECh. 7 - Prob. 14ECh. 7 - Prob. 15ECh. 7 - Prob. 16ECh. 7 - Prob. 17ECh. 7 - Prob. 18ECh. 7 - Prob. 19ECh. 7 - Prob. 20ECh. 7 - Prob. 21ECh. 7 - Prob. 22ECh. 7 - Prob. 23ECh. 7 - Prob. 24ECh. 7 - Prob. 25ECh. 7 - Prob. 26ECh. 7 - Prob. 27ECh. 7 - Prob. 28ECh. 7 - Prob. 29ECh. 7 - Prob. 30ECh. 7 - Prob. 31ECh. 7 - Prob. 32ECh. 7 - Prob. 33ECh. 7 - Prob. 34ECh. 7 - Prob. 35ECh. 7 - Prob. 1PSACh. 7 - Prob. 2PSACh. 7 - Prob. 3PSACh. 7 - Prob. 4PSACh. 7 - Prob. 5PSACh. 7 - Prob. 6PSACh. 7 - Prob. 7PSACh. 7 - Prob. 8PSACh. 7 - Prob. 1PSBCh. 7 - Prob. 2PSBCh. 7 - Prob. 3PSBCh. 7 - Prob. 4PSBCh. 7 - Prob. 5PSBCh. 7 - Prob. 6PSBCh. 7 - Prob. 7PSBCh. 7 - Prob. 8PSBCh. 7 - Prob. 7SPCh. 7 - Prob. 1AACh. 7 - Prob. 2AACh. 7 - Prob. 3AACh. 7 - ETHICS CHALLENGE C1 BTN 20-3 Both the budget...Ch. 7 - Prob. 2BTNCh. 7 - Prob. 3BTNCh. 7 - Prob. 4BTNCh. 7 - Prob. 5BTNCh. 7 - Prob. 6BTN
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