Crescent Company produces stuffed toy animals; one of these is “Arabeau the Cow.
ID: 2569873 • Letter: C
Question
Crescent Company produces stuffed toy animals; one of these is “Arabeau the Cow.” Each Arabeau takes 0.20 yard of fabric (white with irregular black splotches) and eight ounces of polyfiberfill. Fabric costs $3.50 per yard and polyfiberfill is $0.05 per ounce. Crescent has budgeted production of Arabeaus for the next four months as follows:
Inventory policy requires that sufficient fabric be in ending monthly inventory to satisfy 20 percent of the following month's production needs and sufficient polyfiberfill be in inventory to satisfy 40 percent of the following month's production needs. Inventory of fabric and polyfiberfill at the beginning of October equals exactly the amount needed to satisfy the inventory policy.
Each Arabeau produced requires (on average) 0.10 direct labor hour. The average cost of direct labor is $15 per hour.
Required:
Prepare a direct materials purchases budget of fabric for the last quarter of the year showing purchases in units and in dollars for each month and for the quarter in total.
Prepare a direct materials purchases budget of polyfiberfill for the last quarter of the year showing purchases in units and in dollars for each month and for the quarter in total.
Prepare a direct labor budget for the last quarter of the year showing the hours needed and the direct labor cost for each month and for the quarter in total.
Enter the appropriate amounts in the shaded cells in columns D, F, H, and J. 1) Crescent Company Direct Materials Purchases Budget for Fabric For the 4th Quarter October November December Total Units to be produced 42,000 90,000 50,000 182,000 DM per unit (yards) Production needs Desired ending inventory (yards) Total needs Less: Beginning inventory Direct materials to be purchased Cost per yard Total purchase cost 2) Crescent Company Direct Materials Purchases Budget - Polyfiberfill For the 4th Quarter October November December Total Units to be produced 42,000 90,000 50,000 182,000 DM per unit (ounces) Production needs Desired ending inventory (ounces) Total needs Less: Beginning inventory Direct materials to be purchased Cost per ounce Total purchase cost 3) Crescent Company Direct Labor Budget For the 4th Quarter October November December Total Units to be produced 42,000 90,000 50,000 182,000 Direct labor time per unit (hours) Total hours needed Wage per hour Total direct labor costExplanation / Answer
1. Calculation of Direct Materials Budget for Fabric
Particulars
October
November
December
Total 4th Quarter
Units to be produced
42,000
90,000
50,000
182,000
DM per unit(yards)
0.20
0.20
0.20
0.20
Production Needs
42,000 x 0.20 = 8,400 yards
90,000 x 0.20 = 18,000 yards
50,000 x 0.20 = 10,000 yards
36,400 yards
Ending Inventory
20% x 90,000 x 0.20 = 3,600 yards
50,000 x 20% x 0.20 = 2,000 yards
40,000 x 20% x 0.20 = 1,600 yards
7,200yards
Less: Beginning inventory
42,000 x 20% x 0.2 = 1,680 yards
90,000 x 20% x 0.2 = 3,600 yards
50,000 x 20% x 0.2 = 2,000 yards
7,280 yards
Direct Materials to be purchased
10,320 yards
16,400 yards
9,600 yards
36,320 yards
Cost per yard
$3.50
$3.50
$3.50
$3.50
Total Purchase cost
$36,120
$57,400
$33,600
$127,120
2. Calculation of Direct Materials Budget for Polyfiberfill
Particulars
October
November
December
Total 4th Quarter
Units to be produced
42,000
90,000
50,000
182,000
DM per unit(yards)
8 ounces
8 ounces
8 ounces
Production Needs
42,000 x 8 = 336,000 ounces
90,000 x 8 = 720,000 ounces
50,000 x 8 = 400,000 ounces
1,456,000 ounces
Ending Inventory
40% x 90,000 x 8 = 288,000 ounces
50,000 x 40% x 8 = 160,000 ounces
40,000 x 40% x 8 = 128,000 ounces
576,000 ounces
Less: Beginning inventory
42,000 x 40% x 8 = 134,400ounces
90,000 x 40% x 8 = 288,000 ounces
50,000 x 40% x 8 = 160,000 ounces
582,400 ounces
Direct Materials to be purchased
489,600 ounces
592,000 ounces
368,000 ounces
1,449,600 ounces
Cost per yard
$0.05
$0.05
$0.05
$0.05
Total Purchase cost
$24,480
$29,600
$18,400
$72,480
3. Calculation of Direct Labor Budget for 4th Quarter
Particulars
October
November
December
Total 4th Quarter
Units to be produced
42,000
90,000
50,000
182,000
Direct Labor time per unit
0.10
0.10
0.10
Total Hours Needed
4,200 hours
9,000 hours
5,000 hours
18,200 hours
Wage per hour
$15
$15
$15
Total Direct Labor cost
$63,000
$135,000
$75,000
$273,000
Particulars
October
November
December
Total 4th Quarter
Units to be produced
42,000
90,000
50,000
182,000
DM per unit(yards)
0.20
0.20
0.20
0.20
Production Needs
42,000 x 0.20 = 8,400 yards
90,000 x 0.20 = 18,000 yards
50,000 x 0.20 = 10,000 yards
36,400 yards
Ending Inventory
20% x 90,000 x 0.20 = 3,600 yards
50,000 x 20% x 0.20 = 2,000 yards
40,000 x 20% x 0.20 = 1,600 yards
7,200yards
Less: Beginning inventory
42,000 x 20% x 0.2 = 1,680 yards
90,000 x 20% x 0.2 = 3,600 yards
50,000 x 20% x 0.2 = 2,000 yards
7,280 yards
Direct Materials to be purchased
10,320 yards
16,400 yards
9,600 yards
36,320 yards
Cost per yard
$3.50
$3.50
$3.50
$3.50
Total Purchase cost
$36,120
$57,400
$33,600
$127,120
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