Ivans Company produces stuffed toy animals; one of these is Randy the Reindeer. Each reindeer takes 0.10
Question:
Ivans Company produces stuffed toy animals; one of these is Randy the Reindeer. Each reindeer takes 0.10 yard of fabric and three ounces of polyfiberfill. Fabric costs $3.50 per yard, and polyfiberfill is $0.05 per ounce. Ivans has budgeted production of stuffed reindeer for the next four months as follows:
Units
October .........40,000
November ........80,000
December ........50,000
January .........60,000
Inventory policy requires that sufficient fabric be in ending monthly inventory to satisfy 15 percent of the following month’s production needs and sufficient polyfiberfill be in inventory to satisfy 30 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 reindeer produced requires (on average) 0.2 direct labor hour. The average cost of direct labor is $10.50 per hour.
Required:
1. 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.
2. 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.
3. 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.
Step by Step Answer:
Cost Management Accounting and Control
ISBN: 978-0324559675
6th Edition
Authors: Don R. Hansen, Maryanne M. Mowen, Liming Guan