Black Diamond Company produces snow skis. Each ski requires 3 pounds of carbon f

Question

Black Diamond Company produces snow skis. Each ski requires 3 pounds of carbon fiber. The company's management predicts that 6,300 skis and 7,300 pounds of carbon fiber will be in inventory on June 30 of the current year and that 163,000 skis will be sold during the next (third) quarter. A set of two skis sells for $430 Management wants to end the third quarter with 4,800 skis and 5,300 pounds of carbon fiber in inventory. Carbon fiber can be purchased for $12 per pound. Each ski requires 0.4 hours of direct labor at $17 per hour. Variable overhead is applied at the rate of $7 per direct labor hour. The company budgets fixed overhead of $1,795,000 for the quarter. 0.22 points Required: 1. Prepare the third-quarter production budget for skis. BLACK DIAMOND COMPANY Production Budget (in units) Third Quarter Required units of available production Units to be manufactured

Explanation / Answer

Production Budget: Budgeted sales units 163000 Add: Desired Ending inventory 4800 Total needs 167800 Less: Beginning Inventory 6300 Units to be manufactured 161500 Direct Material Budget: Budgeted Production units 161500 Raw material required per unit 3 Total production needs 484500 Add: Desired Ending raw material 5300 Total Needs 489800 Lless: beginning Raw material 7300 Material purchases units 482500 Cost per unit 12 Purchase in $ 5790000 Direct labor Budget: Budgeted Production units 161500 Hours reqquired per unit 0.4 Total labour hours 64600 labour cost per unit 17 labour dollars 1098200 Factory Overheads budget: Labour hours required 64600 variable OH rate per hour 7 Total Variable OH 452200 Total Fixed Overheads 1795000 Budgeted factory OH in $ 2247200

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