Question: Grady Inc manufactures model airplane kits and projects production at
Grady, Inc. manufactures model airplane kits and projects production at 350, 425, 450, and 500 kits per quarter. Direct materials are $ 6 per kit. Indirect materials are considered insignificant and are not included in the budgeting process. Beginning Raw Materials Inventory is $ 600, and the company desires to end each quarter with 20% of the materials needed for the next month’s production. Grady desires a balance of $ 600 in Raw Materials Inventory at the end of the fourth quarter. Each kit requires 0.25 hours of direct labor at an average cost of $ 20 per hour. Manufacturing overhead is allocated using direct labor hours as the allocation base. Variable overhead is $ 0.50 per kit and fixed overhead is $ 129 per quarter. Prepare Grady’s direct materials budget, direct labor budget, and manufacturing overhead budget for the year. Round the direct labor hours needed for production, budgeted overhead costs, and predetermined overhead allocation rate to two decimal places.
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