Problem 10-9 (Part Level Submission) a. Prepare a production budget for each qua

Question

Problem 10-9 (Part Level Submission)

a. Prepare a production budget for each quarter of 2015.

Fenzel Slide Oil
Production Budget for 2015

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Year

b. Prepare a material purchases budget for each quarter of 2015 for chemical A.

c. Prepare a material purchases budget for each quarter of 2015 for chemical B

d. Prepare a budgeted income statement for each quarter of 2015 (ignore taxes). (List variable costs before fixed costs.)

(Entry lists)

Desired ending inventory of finished units

Unit Sales

Begining inventory if finished units

Units to be produced

Problem 10-9 (Part Level Submission)

Fenzel Slide Oil produces a lubricant, SlickTone, which is used on trombone slides. Information about the budget for the year 2015 is as follows:
1. The company expects to sell 7,300 bottles of SlickTone in the first quarter, 6,200 in the second quarter, 10,300 in the third quarter, and 8,300 in the fourth quarter. 2. A bottle of SlickTone requires 6 ounces of Chemical A and 3.5 ounces of Chemical B. 3. For the first, second, and third quarters of 2015, the desired ending inventory of finished goods is equal to 9 percent of next quarter’s sales, whereas the desired ending inventory for material is 12 percent of next quarter’s production requirements. 4. There are 1,600 bottles of SlickTone, 4,900 ounces of Chemical A, and 2,600 ounces of Chemical B on hand at the beginning of the first quarter. 5. At the end of the fourth quarter, the company must have 1,000 bottles of SlickTone, 8,300 ounces of Chemical A, and 3,600 ounces of Chemical B to meet its needs in the first quarter of 2016. 6. The cost of Chemical A is $1.00 per ounce, the cost of Chemical B is $0.10 per ounce, and the selling price of SlickTone is $14 per bottle. 7. The cost of direct labor is $0.50 per bottle, and the cost of variable overhead is $0.80 per bottle. Fixed manufacturing overhead is $3,100 per quarter. 8. Variable selling and administrative expense is 4 percent of sales and fixed selling and administrative expense is $2,600 per quarter.

a. Prepare a production budget for each quarter of 2015.

Fenzel Slide Oil
Production Budget for 2015

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Year

b. Prepare a material purchases budget for each quarter of 2015 for chemical A.

c. Prepare a material purchases budget for each quarter of 2015 for chemical B

d. Prepare a budgeted income statement for each quarter of 2015 (ignore taxes). (List variable costs before fixed costs.)

(Entry lists)

Total Needed

Desired ending inventory of finished units

Unit Sales

Begining inventory if finished units

Units to be produced

:

:

Explanation / Answer

a)

b)

c)

d)

Working

Fenzel Slide Oil Production Budget for 2015 First Quarter Second Quarter Third Quarter Fourth Quarter Year Expected sales in unit 7300 6200 10300 8300 32100 Add : Desired Ending Finished Goods 558 927 747 1000 1000 Total Need 7858 7127 11047 9300 33100 Deduct : Beginning Inventory of Finished Goods 1600 558 927 747 1600 Unit to be Produced 6258 6569 10120 8553 31500

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