Vista Electronics, Inc. manufactures two different types of coils used in electr

Question

Vista Electronics, Inc. manufactures two different types of coils used in electric motors. In the fall of the current year, Erica Becker, the controller, compiled the following data.

Sales forecast for 20x0 (all units to be shipped in 20x0):

Raw-material prices and inventory levels:

Use of raw material:

Direct-labor requirements and rates:

Finished-goods inventories (in units):

Production overhead:

Product Units Price Light coil 60,000 $ 120 Heavy coil 40,000 170 6. Prepare the production-overhead budget (in dollars) for 20x0. (Round "Cost Driver Rate" to 2 decimal places.) Production Overhead Budget for 20x0 Cost Driver Cost Driver Budgeted Quantity Rate Cost Purchasing and material handing Depreciation, utilities, and inspection Shipping General production overhead Total production overhead lb coils coils hr

Explanation / Answer

Answer-

1. Units to be produced during the year = Sales + Closing inventory- Opening inventory

Light Coil = 60,000 units+25,000 units- 20,000 units = 65,000 units

Heavy Coil = 40,000 units+9,000 units- 8,000 units = 41,000 units

2. Calculation of raw material requirement -

Sheet metal = (4 lb. per unit*65,000 units)+ (5 lb. per unit*41,000 units)

= 465,000 lbs.

Purchase = Raw Material required+ Closing inventory- Opening inventory

= 465,000 lbs.+36,000 lbs. - 32,000 lbs.

= 469,000 lbs.

Copper wire = (2 lb,*65,000 units)+(3 lb.*41,000 units)

= 253,000 lbs.

Purchase = 253,000 lbs.+32,000 lbs.- 29,000 lbs.

= 256,000 lbs.

Platform = (1 unit*41,000 units)

= 41,000 units

Purchase = 41,000 units+7,000 units- 6,000 units

= 42,000 units

3. Calculation of direct labour hours requirement -

(2 hours*65,000 units)+(3 hours*41,000 units)

= 253,000 hours

Production overheads budget

Cost Driver Quantity Cost Driver Rate Budgeted Cost Purchasing and material handling 469,000 lbs.+256,000 lbs. = 725,000 lbs. $0.25 $181,250 Depreciation, utilities and inspection 65,000 units+ 41,000 units = 106,000 units $4 $424,000 Shipping 60,000 units + 40,000 units = 100,000 units $1 $100,000 General production overheads $253,000 hours $3 $759,000 Total Production overheads $1,464,250

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