Question

# Daffy Tunes manufactures a toy rabbit with moving parts and a built-in voice box. Projected sales...

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

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