|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:
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|
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
Hence, the answer is $127,500
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