What the Scrap Steel Co. produces and sells steel doors with budgeted or standard costs as follows:
Question:
What the Scrap Steel Co. produces and sells steel doors with budgeted or standard costs as follows:
| Inputs: | Standards: |
| Direct Materials | 100 lbs per door; $0.40 per pound |
| Direct Labor Variable Overhead Rate | 10 hrs per door; $23.00 per hour 10 hrs per door; $27.60 per hour |
| Fixed Overhead Costs | $26,000 per month
|
Depreciation is a non-cash expense and is valued at $1,000 and is included in the Fixed OH cost above.
Unit Sales for the prior and future months are budgeted as follows:
| July | August | September |
| 280 | 250 | 270
|
The desired Ending Inventory of Materials is 5% of the materials needed for production for the following month. The desired Ending Inventory of Finished Goods is 10% of production for the following month. The Ending Inventory for June was 28 units. The cost per unit for June was $ 386 per unit.
The budgeted sales price is $1,200 per steel door. Sales are budgeted as 100% credit sales. According to previous recorded collections, Scrap Steel determined that 55% of sales are collected during the month of sale; 43% are collected in the following month; 2% are uncollectible. June Accounts receivable were $129,000 and will be collected in full during July.
The materials purchases are 100% credit 70% in month of purchase and 30% in the following month.
The beginning Accounts Payable is $5,500.
Selling and Administrative expenses are:
| Variable Selling and Administrative Expenses | $50 per unit sold |
| Fixed Selling and Administrative Expenses | $15,000 per month
|
Selling and Administrative depreciation is a noncash expense that is at a rate of $750 per month that is included in the fixed expenses above.
The following information for the cash account follows:
Beginning Cash Balance $165,000
Dividend Paid 30,000
Capital Expenditures 153,000
Scrap Steel requires a minimum ending cash balance of $1,500.
A partial master budget for July as follows.
Sales budget for July
Units to be sold in July: 280 units
Sales price per unit: x $1,200 per steel
Sales Budget for July= $336,000
Production budget for July
Sales Units: 280
Desired ending inventory: + 25 units (10% * 250 units)
Beginning inventory 28 units
Required production =277 units
Direct material quantity needed for production
Required production: 277 units
Production units required: X 100lbs
Direct material quantity needed for production= 27,700lbs
Direct material quantity to be purchased for July
Direct material quantity needed for production: 27,700lbs
Desired ending inventory of materials (August): +1,350 (5%*27,000 lbs)
Beginning inventory of materials: -1,400 lbs (5% x 28,000lbs)
Material Quantity to be purchased: 27,650 lbs
Cost per pound of material: x $0.40
Total cost of materials purchases: $11,060
Budged cost of direct material purchases for July
Material used in production: 27,700lbs
Cost per pound of material: x$0.40
Cost of materials used= $11,080
Direct labor needed for production
Labor hrs required per unit: 10 hrs
Required production: 277 units
Total labor hrs needed: 2,770 hrs
Labor rate per hour: x$23
Total cost of direct labor: $63,710
Budgeted factory overhead costs
Fixed Overhead costs: $26,000
Total variable overhead: + $7,645.20 (277 * 27.60)
Total factory overhead costs = $33,645.20
Budgeted cost of goods sold
Direct materials used: $11,080
Direct labor costs: $63,710
Factory overhead + $33,645.20
Cost of goods sold = $108,435.20
Budgeted selling and administrative costs
Expenses: $14,000 ( $50 * 280)
Fixed selling and administrative expenses: +$15,000
Total selling and administrative costs: = $29,000
Required:
- Budgeted income statement
- Prepare a cash budget; include cash receipts and disbursements
- Budgeted cost of direct labor
Total labor hours needed
Labor rate per hour X
Total cost of direct labor =
Keep track of the tougher aspects
Expert Answer:
