West Partners manufactures metal fixtures. Each fitting requires both steel and an alloy that can withstand extreme temperatures. The following data apply to the production of the fittings for year 1: Direct materials per unit 22.0 pounds of steel at $2.80 per pound 3.2 pounds of alloy at $36.00 per pound Direct labor per unit 0.24 hours at $50 per hour Overhead per unit Indirect materials $ 2.40 Indirect labor 2.80 Utilities 2.60 Machine depreciation 3.10 Other overhead 2.60 Total overhead per unit $ 13.50 The machine depreciation and other overhead costs are fixed and are based on production of 120,000 units annually. Plant capacity is 140,000 units annually. All other overhead costs are variable. The following are forecast for year 2. A wage increase of 6 percent for both direct and indirect labor, which was negotiated recently, will go into effect. Steel prices are expected to decrease by 5 percent while alloy prices are expected to increase by 10 percent. Machine depreciation costs are expected to increase by 4 percent. All other unit overhead costs are expected to remain constant. West Partners expects to sell 104,000 units in year 2. The current inventory of fittings is 10,000 units. Management is forecasting much higher sales volume in year 3, so wants to have 13,000 units on hand by the end of year 2. Steel and alloy inventories will not change. Sales are approximately uniform over the year. Required: Prepare a production budget for the coming year. Estimate the direct materials, direct labor, and overhead costs for the coming year.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
West Partners manufactures metal fixtures. Each fitting requires both steel and an alloy that can withstand extreme temperatures. The following data apply to the production of the fittings for year 1:
| Direct materials per unit | |
|---|---|
| 22.0 pounds of steel at $2.80 per pound | |
| 3.2 pounds of alloy at $36.00 per pound | |
| Direct labor per unit | |
| 0.24 hours at $50 per hour | |
| Indirect materials | $ 2.40 |
| Indirect labor | 2.80 |
| Utilities | 2.60 |
| Machine |
3.10 |
| Other overhead | 2.60 |
| Total overhead per unit | $ 13.50 |
The machine depreciation and other overhead costs are fixed and are based on production of 120,000 units annually. Plant capacity is 140,000 units annually. All other overhead costs are variable.
The following are forecast for year 2. A wage increase of 6 percent for both direct and indirect labor, which was negotiated recently, will go into effect. Steel prices are expected to decrease by 5 percent while alloy prices are expected to increase by 10 percent. Machine depreciation costs are expected to increase by 4 percent. All other unit overhead costs are expected to remain constant.
West Partners expects to sell 104,000 units in year 2. The current inventory of fittings is 10,000 units. Management is
Required:
Prepare a production budget for the coming year.
Estimate the direct materials, direct labor, and overhead costs for the coming year.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
