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:
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:
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 $15,000 is factory depreciation.
If the budgeted direct labor time for November is 7,000 hours, then the total budgeted manufacturing overhead for November is:
|Raw materials in yard||3|
|Total Raw materials production||42,000|
Add : Ending inventory
( 14,500 x 3 x 20% )
|Total needs of Production||50,700|
|Less : Beginning inventory||(2,500)|
|Cost of material||$ 0.85|
|Total cost of Material K to be Purchased in August||$ 40,970|
|Option (a) is Correct|
Variable manufacturing overhead
= Variable manufacturing overhead per DLH x Budgeted DLH's
= $ 5 x 7,000 Hours
|Fixed manufacturing overhead||$ 75,000|
|Budgeted manufacturing overhead||$ 110,000|
|Option (b) is Correct|
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