Question

Daffy Tunes manufactures a toy rabbit with moving parts and a built-in voice box. Projected sales in units for the next 5 months are as follows:

	Projected
Month	Sales in Units
January	30,000
February	36,000
March	33,000
April	40,000
May	29,000

Each rabbit requires basic materials that Daffy purchases from a single supplier at $3.50 per rabbit. Voice boxes are purchased from another supplier at $1.00 each. Assembly labor cost is $2.00 per rabbit, and variable overhead cost is $.50 per rabbit. Fixed manufacturing overhead applicable to rabbit production is $12,000 per month. Daffy’s policy is to manufacture 1.5 times the coming month’s projected sales every other month, starting with January (i.e., odd-numbered months) for February sales, and to manufacture 0.5 times the coming month’s projected sales in alternate months (i.e., even-numbered months). This allows Daffy to allocate limited manufacturing resources to other products as needed during the even-numbered months.

Daffy Tunes’ dollar production budget for toy rabbits for February is
A.	$327,000
B.	$390,000
C.	$113,500
D.	$127,500

Answer 1

Daffy Tunes’ dollar production budget for toy rabbits for February is = $127,500

February the production is equal to 0.50 times of the March sales.

Projected March sales = 33,000 Units,

So February Sales = 33,000 x 0.50 = 16,500 units.

The Total Variable cost per unit = $7 per unit ($3.50 + $1 + $2 + $.50),

So total variable costs will be = 16,500 Units x $7 per unit = $115,500

Daffy Tunes’ dollar production budget for toy rabbits for February

= Total Variable Costs + Fixed manufacturing overhead

= $115,500 + 12,000

= $127,500

Hence, the answer is $127,500