Crescent Company produces stuffed toy animals; one of these is “Arabeau the Cow.” Each Arabeau takes 0.20 yard of fabric (white with irregular black splotches) and eight ounces of polyfiberfill. Fabric costs $3.50 per yard and polyfiberfill is $0.05 per ounce. Crescent has budgeted production of Arabeaus for the next four months as follows:
Inventory policy requires that sufficient fabric be in ending monthly inventory to satisfy 20 percent of the following month’s production needs and sufficient polyfiberfill be in inventory to satisfy 40 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 Arabeau produced requires (on average) 0.10 direct labor hour. The average cost of direct labor is $15 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.
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Chapter 8 Solutions
EBK CORNERSTONES OF COST MANAGEMENT
- Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the annual ordering cost. 2. Compute the annual carrying cost. 3. Compute the cost of Ottiss current inventory policy. Is this the minimum cost? Why or why not?arrow_forwardRehydrator makes a nutrition additive and expects to sell 3,000 units in January, 2,000 in February, 2,500 in March, 2,700 in April. and 2,900 in May. The required ending inventory is 20% of the next months sales, and the beginning inventory on January 1 was 600 units. Prepare a production budget for the first four months of the year.arrow_forwardE. Evans 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: 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. 1.Compute for the budgeted direct labor cost for October. 2.Compute for the budgeted direct labor cost for…arrow_forward
- La Ying Lives produces leather handbags. The production budget for the next four months is: July 5700 units, August 7100, September 8200, October 8900. Each handbag requires o.6 square meters of leather. La Ying's leather inventory policy is 20% of next month's production needs. If the leather policy is met, what will the July 1 inventory be? Select one: a. 684.0 square meters b. 234.0 square meters c. 852.0 square meters d. 1759.0 square metersarrow_forwardjeremy inc. produces leather handbags. The production budget for the next four months is:July 5000 units, August 7300, September 7500, October 8800. Eachhandbag requires 0.5 square meters of leather. Jeremy inc's leather inventory policy is 30 percent of next month's production needs. If the leather policy is met, what will the july 1 inventory be?750.0 square meters1095.0 square meters1825.0 square meters300.0 square metersarrow_forwardMemanarrow_forward
- Iguana, Inc., manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $2.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12.00 per hour. Iguana has the following inventory policies: Ending finished goods inventory should be 40 percent of next month’s sales. Ending direct materials inventory should be 30 percent of next month’s production. Expected unit sales (frames) for the upcoming months follow: March 275 April 250 May 300 June 400 July 375 August 425 Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.60 per unit sold.Iguana, Inc., had $10,800 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the…arrow_forwardIguana, Inc., manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $2.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12.00 per hour. Iguana has the following inventory policies: Ending finished goods inventory should be 40 percent of next month’s sales. Ending direct materials inventory should be 30 percent of next month’s production. Expected unit sales (frames) for the upcoming months follow: March 275 April 250 May 300 June 400 July 375 August 425 Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.60 per unit sold.Iguana, Inc., had $10,800 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the…arrow_forwardIguana, Inc., manufactures bamboo picture frames that sell for $25 each. Each frame requires 4 linear feet of bamboo, which costs $2.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12.00 per hour. Iguana has the following inventory policies: Ending finished goods inventory should be 40 percent of next month’s sales. Ending direct materials inventory should be 30 percent of next month’s production. Expected unit sales (frames) for the upcoming months follow: March 275 April 250 May 300 June 400 July 375 August 425 Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.60 per unit sold.Iguana, Inc., had $10,800 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the…arrow_forward
- Iguana, Inc., manufactures bamboo picture frames that sell for $20 each. Each frame requires 4 linear feet of bamboo, which costs $1.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12 per hour. Iguana has the following inventory policies: Ending finished goods inventory should be 40 percent of next month’s sales. Ending direct materials inventory should be 30 percent of next month’s production. Expected unit sales (frames) for the upcoming months follow: March 360 April 420 May 470 June 570 July 545 August 595 Variable manufacturing overhead is incurred at a rate of $0.20 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.50 per unit sold. Iguana, Inc., had $10,800 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the…arrow_forwardIguana, Inc., manufactures bamboo picture frames that sell for $20 each. Each frame requires 4 linear feet of bamboo, which costs $1.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $12 per hour. Iguana has the following inventory policies: Ending finished goods inventory should be 40 percent of next month’s sales. Ending direct materials inventory should be 30 percent of next month’s production. Expected unit sales (frames) for the upcoming months follow: March 360 April 420 May 470 June 570 July 545 August 595 Variable manufacturing overhead is incurred at a rate of $0.20 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for expected production of 4,000 units for the year. Selling and administrative expenses are estimated at $650 per month plus $0.50 per unit sold. Iguana, Inc., had $10,800 cash on hand on April 1. Of its sales, 80 percent is in cash. Of the…arrow_forwardIguana inc. manufactures bamboo picture frames that sell for 20 dollars each. each frame requires 4 linear feet of bamboo, which costs 1.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages 13 per hour, iguana has the following inventory policies: Ending finished goods inventory should be 40 percent of next month's sales. Ending direct materials inventory should be 30 percent of nect month's production Expected unit sales (frames) for the upcoming months follow: March 345April 390May 440June 540July 515August 565 Variable manufacturing overhead is incurred at a rate of $0.30 per unit produced. Annual fixed manufaturing overhead is estimated to be 7,200 (600 per month) for expected production of 6,000 units for the year. Selling and administrative expenses are estimated at 650 per month plus 0.50 per unit sold. Iguana Inc. had 15,800 cash on hand on april 1. of its sales, 80 person is in cahs.…arrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College