Question

1. Coles Corporation, Inc. makes and sells a single product, Product R. Three yards of Material K are needed to make one unit of Product R. Budgeted production of Product R for the next five months is as follows:

August	14,000	units
September	14,500	units
October	15,500	units
November	12,600	units
December	11,900	units

The company wants to maintain monthly ending inventories of Material K equal to 20% of the following month's production needs. On July 31, this requirement was not met since only 2,500 yards of Material K were on hand. The cost of Material K is $0.85 per yard. The company wants to prepare a Direct Materials Purchase Budget for the rest of the year.

The total cost of Material K to be purchased in August is:

Multiple Choice

• $40,970

• $48,200

• $33,840

• $42,300

2. 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 direct labor time for November is 7,000 hours, then the total budgeted manufacturing overhead for November is:

Multiple Choice

• $95,000

• $110,000

• $75,000

• $125,000

Answer 1

Answer:
1)
Particulars	August
Budgeted production	14,000
Raw materials in yard	3
Total Raw materials production	42,000
Add : Ending inventory                 ( 14,500 x 3 x 20% )	8,700
Total needs of Production	50,700
Less : Beginning inventory	(2,500)
Total	48,200
Cost of material	$ 0.85
Total cost of Material K to be Purchased in August	$ 40,970
Option (a) is Correct
2)
Variable manufacturing overhead      = Variable manufacturing overhead per DLH x Budgeted DLH's      =   $ 5 x 7,000 Hours	$ 35,000
Fixed manufacturing overhead	$ 75,000
Budgeted manufacturing overhead	$ 110,000
Option (b) is Correct