Question Two: (18 marks) (B1, C1)

Part A: (10 marks)

Ahlia, Inc. has budgeted direct materials purchases of $400,000 in March and $300,000 in April. Past experience indicates that the company pays for 40% of its purchases in the month of purchase and the remaining 60% in the next month. Other costs are all paid during the month incurred. During April, the following items were budgeted:

Wages expense $130,000

Purchase of office equipment 210,000

Selling and administrative expenses 126,000

Depreciation expense 18,000

Instructions

Compute the amount of budgeted cash disbursements for April.

Part B: (8 marks)

Ahlia Company is preparing its direct labor budget for 2021 from the following production budget based on a calendar year:

Quarter Units

1 60,000

2 30,000

3 45,000

4 75,000

Each unit requires 2 hours of direct labor. The union contract provides for a 10% increase in wage rate to $11 per hour on October 1.

Instructions

Prepare a direct labor budget for 2021.