Chp 20 2 Rad Co. provides the following sales forecast and production budget for

Question

Chp 20 2

Rad Co. provides the following sales forecast and production budget for the next four months: The company plans for finished goods inventory of 280 units at the end of June. In addition, each finished unit requires five pounds of raw materials and the company wants to end each month with raw materials inventory equal to 20% of next month's production needs. Beginning raw materials inventory for April was 600 pounds. Each finished unit requires 0.40 hours of direct labor at the rate of $15 per hour. The company budgets variable overhead at the rate of $19 per direct labor hour and budgets fixed overhead of $9,600 per month. Prepare a direct labor budget Prepare a factory overhead budget.

Explanation / Answer

Direct labor budget :

b) Factory overhead budget

April May June Budgeted production unit 600 730 700 Time required per unit .4 .4 .4 Total hours required 240 [600*.4] 292   [730*.4] 280 cost per hour 15 15 15 labor cost 3600 4380 4200

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