Complete the Production Budget. Desired ending this was met for March and carrie

ID: 2584113 • Letter: C

Question

Complete the Production Budget. Desired ending this was met for March and carried to Apnts invertorys 20% ofnext monts inventory. July sales are expected to be 800 April Sales (Units) 300 June Total 600 500 1.400 ) Desired ending Inv Total needs Less Beg. Inv. Units to produce Determine the total amount of Direct Labor in our budget for January and February together given the following information: Direct Labor per unit 1.5 hours Direct Labor rate $30 per hour Expected number of units to produce in January is 2,000 Expected number of units to produce in February is 2,500 January

Explanation / Answer

Solution

Production budget for the quarter ending June

April

May

June

Total

Sales (units)

300

600

500

1,400

Desired ending inventory

120

100

160

380

Total needs

420

700

660

1,780

Less: Beginning inventory

120

100

280

Units to produce

360

580

560

1,500

Notes:

Accordingly, ending inventory of

April = 20% of May’s sales = 20% of 600 = 120

May = 20% of June’s Sales = 20% of 500 = 100

June = 20% of July Sales = 20% of 800 = 160

Hence, Beginning inventory of April is ending inventory of March

March ending inventory = 20% of sales of April = 20% of 300 = 60

Beginning inventory of May = ending inventory of April = 120

Beginning inventory of June = ending inventory of May = 100

Direct labor budget:

January

February

Number of units of production

2,000

2,500

direct labor per unit

1.5 hours

total direct labor hours

3,000

3,750

direct labor rate per hour

$30

Total direct labor cost

$90,000

$112,500

Direct labor rate = $30

Direct labor cost

-January = 3,000 hours x $30 = $90,000

February = 3,750 hours x $30 = $112,500