Black Diamond Company produces snow skis. Each ski requires 2 pounds of carbon f
ID: 341996 • Letter: B
Question
Black Diamond Company produces snow skis. Each ski requires 2 pounds of carbon fiber. The company's management predicts that 6,700 skis and 7,700 pounds of carbon fiber will be in inventory on June 30 of the current year and that 167,000 skis will be sold during the next (third) quarter. A set of two skis sells for $470. Management wants to end the third quarter with 5,200 skis and 5,700 pounds of carbon fiber in inventory Carbon fiber can be purchased for $16 per pound. Each ski requires 0.5 hours of direct labor at $21 per hour. Variable overhead is applied at the rate of $11 per direct labor hour. The company budgets fixed overhead of $1,799,000 for the quarter. References Section Break Problem 20-1A Manufacturing: Preparing production and manufacturing budgets LO C2, P1 value: 2.77 points Problem 20-1A Part 1 Required 1. Prepare the third-quarter production budget for skis. BLACK DIAMOND COMPANY Production Budget (in units) Third Quarter Required units of svailable production Units to be manufacturedExplanation / Answer
ANS. 1 Black diamond Company Calculation required units of available production Estimated Closing Stock of Ski 5,200 Estimated Sales of Ski 167,000 Required units of avaible production 172,200 Third - Quarter Production Black diamond Company Production Budget (In units) Particular Amount Required units of avaible production 172,200 Less:- Eastimated Opening Stock (6,700) Units to be Manufactured 165,500 2 Third - Quarter Production Black diamond Company Direct Materials Budget Particular Amount Budgeted Production 165,500 Material Needed for production 331,000 ( 165500 x 2 Pound of carbon fiber) Add:- estimated Closing Stock 5,700 Total Material requirement 336,700 (Material needed for production + Closing stock) Less:- estimated opening Stock (7,700) Material to be purchased 329,000 Material rate per unit (per pound) 16 Total cost of direct material purchases 5,264,000 3 Third - Quarter Production Black diamond Company Direct Labour Budget Particular Amount Units to produced 165,500 Labour hours per unit of ski 0.50 Total Labour hours needed 82,750 (165500 X 0.5) Labour rate per hour 21 Total labour cost $ 1,737,750 4 Third - Quarter Production Black diamond Company Factory Overhead Budget Particular Amount Total Labour hours needed 82,750 variable overhead rate per hour 11.00 Total Cost of variable overhead 910,250 Fixed overhead cost 1,799,000 Total Overhead cost 2,709,250
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