Question

The Charade Corporation is preparing its Manufacturing Overhead budget for the fourth quarter of the year. The budgeted variable manufacturing overhead is $5.00 per direct labor-hour; the budgeted fixed manufacturing overhead is $75,000 per month, of which $15,000 is factory depreciation.

If the budgeted cash disbursements for manufacturing overhead for December total $105,000, then the budgeted direct labor-hours for December must be:

Multiple Choice

• 6,000 direct labor-hours

• 21,000 direct labor-hours

• 9,000 direct labor-hours

• 3,000 direct labor-hours

The usual starting point for a master budget is:

Multiple Choice

• the direct materials purchase budget.

• the budgeted income statement.

• the sales forecast or sales budget.

• the production budget.

There are various budgets within the master budget. One of these budgets is the production budget. Which of the following BEST describes the production budget?

Multiple Choice

• It details the required direct labor hours.

• It details the required raw materials purchases.

• It is calculated based on the sales budget and the desired ending inventory.

• It summarizes the costs of producing units for the budget period.

When preparing a direct materials budget, the required purchases of raw materials in units equals:

Multiple Choice

• raw materials needed to meet the production schedule + desired ending inventory of raw materials − beginning inventory of raw materials.

• raw materials needed to meet the production schedule − desired ending inventory of raw materials − beginning inventory of raw materials.

• raw materials needed to meet the production schedule − desired ending inventory of raw materials + beginning inventory of raw materials.

• raw materials needed to meet the production schedule + desired ending inventory of raw materials + beginning inventory of raw materials.

Answer 1

1
Budgeted cash disbursements	105000
Less:Cash fixed manufacturing overhead	60000	=75000-15000
Budgeted variable manufacturing overhead	45000
Divide by Variable manufacturing overhead rate	5.00
Budgeted direct labor-hours for December	9000
9,000 direct labor-hours is correct option

2

The usual starting point for a master budget is the sales forecast or sales budget.

All other budgets are based on budgeted sales for the period.

Option C is correct

3

Production budget- It is calculated based on the sales budget and the desired ending inventory.

Option C is correct

4

The required purchases of raw materials in units equals raw materials needed to meet the production schedule + desired ending inventory of raw materials − beginning inventory of raw materials.

Option A is correct