70.2K

Verified Solution

Link Copied!

1. Down Under Products, Ltd., of Australia has budgeted sales ofits popular boomerang for the next four months as follows:

	Unit Sales
April		60,000
May		80,000
June		100,000
July		85,000

The company is now in the process of preparing a production budgetfor the second quarter. Past experience has shown that end-of-monthinventory levels must equal 20% of the following month’s unitsales. The inventory at the end of March was 12,000 units.

Required:

Prepare a production budget by month and in total, for thesecond quarter.

2. Two grams of musk oil are required for each bottle of MinkCaress, a very popular perfume made by a small company in westernSiberia. The cost of the musk oil is $1.70 per gram. Budgetedproduction of Mink Caress is given below by quarters for Year 2 andfor the first quarter of Year 3:

	Year 2					Year 3
	First	Second	Third	Fourth		First
Budgeted production, inbottles	78,000	108,000	168,000	118,000		88,000

Musk oil has become so popular as a perfume ingredient that ithas become necessary to carry large inventories as a precautionagainst stock-outs. For this reason, the inventory of musk oil atthe end of a quarter must be equal to 20% of the followingquarter’s production needs. Some 31,200 grams of musk oil will beon hand to start the first quarter of Year 2.

Required:

Prepare a direct materials budget for musk oil, by quarter andin total, for Year 2. (Round "Unit cost of raw materials"answers to 2 decimal places.)

3. The direct labor budget of YuvwellCorporation for the upcoming fiscal year contains the followingdetails concerning budgeted direct labor-hours:

	1stQuarter	2ndQuarter	3rdQuarter	4thQuarter
Budgeted direct labor-hours	9,600	9,000	9,300	10,100

The company uses direct labor-hours as its overhead allocationbase. The variable portion of its predetermined manufacturingoverhead rate is $4.00 per direct labor-hour and its total fixedmanufacturing overhead is $64,000 per quarter. The only noncashitem included in fixed manufacturing overhead is depreciation,which is $16,000 per quarter.

Required:

1. Prepare the company’s manufacturing overhead budget for theupcoming fiscal year.

2. Compute the company’s predetermined overhead rate (includingboth variable and fixed manufacturing overhead) for the upcomingfiscal year.