3. Electra Manufacturing, Inc., produces control valves used in the production of oil field equipment. The...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
3. Electra Manufacturing, Inc., produces control valves used in the production of oil field equipment. The control valves are sold to various gas and oil engineering companies throughout the United States. Projected sales in units for the coming four months are as follows: LU January February 20,000 25,000 March April 30,000 30,000 The following data pertain to production policies and manufacturing specifications fol- lowed by Electra: a. Finished goods inventory on January 1 is 13,000 units. The desired ending inventory for each month is 70 percent of the next month's sales. b. The data on materials used are as follows: Direct Material Part 714 Part 502 Per-Unit Usage 5 3 Unit Cost $4 3 C. Inventory policy dictates that sufficient materials be on hand at the beginning of the month to produce 50 percent of that month's estimated sales. This is exactly the amount of material on hand on January 1. The direct labor used per unit of output is two hours. The average direct labor cost per hour is $15. d. Overhead each month is estimated using a flexible budget formula. (Activity is mea- sured in direct labor hours.) Fixed Cost Component Supplies $ Variable Cost Component $1.00 Power 0.20 Maintenance. 28,000 1.10 Supervision 14,000 Depreciation 100,000 Taxes 7,000 Other 56,000 1.60 c. Monthly selling and administrative expenses are also estimated using a flexible bud- geting formula. (Activity is measured in units sold.) Fixed Costs Variable Costs Salaries $30,000 Commissions Depreciation $0.75 5,000 Shipping 2.60 Other 10,000 0.40 f. The unit selling price of the control valve is $90. g. In February, the company plans to purchase land for future expansion. The land costs $90,000. 290 Part Two Fundamental Costing and Control h. All sales and purchases are for cash. Cash balance on January 1 equals $162,900. If the firm develops a cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage. Any cash borrowed is repaid one month later, as is the interest due. The interest rate is 12 percent per annum. Required: Prepare a monthly operating budget for the first quarter with the following schedules: 1. Sales budget 2. Production budget 3. Direct materials purchases budget 4. Direct labor budget 5. Overhead budget 6. Selling and administrative expense budget 7. Ending finished goods inventory budget 8. Cost of goods sold budget 9. Budgeted income statement (ignore income taxes) 10. Cash budget Schedule 3: Direct materials purchases budget January February March Total Part 714 Units to be produced. 24,500 Part 502 24,500 Part 714 Part 502 Part 714 Part 502 Part 714 Part 502 28,500 28,500 x 30,000 5 30,000 x 83,000 5 x 83,000 3 Dir. mat. per unit. 5 5 3 150,000 Production needs 122,500 Desired El 62.500 73,500 37.500 142,500 85,500 75,000 90,000 45,000 415,000 75,000 249,000 45,000 75.000 45.000 225,000 135,000 490,000 294,000 Total needs. 185,000 111,000 217,500 130,500 75,000 45.000 Less: Bl 50,000 30,000 62,500 37,500 150,000 90,000 50,000 440,000 30.000 264,000 Dir. mat. to purchase...... 135,000 81,000 155,000 93,000 $4 x $3 $4 $3 Cost per unit. Total cost. $4 $3 $4 $3 $600,000 $270,000 $1.760,000 $792,000 $540,000 $243,000 $620,000 $279,000 3. Electra Manufacturing, Inc., produces control valves used in the production of oil field equipment. The control valves are sold to various gas and oil engineering companies throughout the United States. Projected sales in units for the coming four months are as follows: LU January February 20,000 25,000 March April 30,000 30,000 The following data pertain to production policies and manufacturing specifications fol- lowed by Electra: a. Finished goods inventory on January 1 is 13,000 units. The desired ending inventory for each month is 70 percent of the next month's sales. b. The data on materials used are as follows: Direct Material Part 714 Part 502 Per-Unit Usage 5 3 Unit Cost $4 3 C. Inventory policy dictates that sufficient materials be on hand at the beginning of the month to produce 50 percent of that month's estimated sales. This is exactly the amount of material on hand on January 1. The direct labor used per unit of output is two hours. The average direct labor cost per hour is $15. d. Overhead each month is estimated using a flexible budget formula. (Activity is mea- sured in direct labor hours.) Fixed Cost Component Supplies $ Variable Cost Component $1.00 Power 0.20 Maintenance. 28,000 1.10 Supervision 14,000 Depreciation 100,000 Taxes 7,000 Other 56,000 1.60 c. Monthly selling and administrative expenses are also estimated using a flexible bud- geting formula. (Activity is measured in units sold.) Fixed Costs Variable Costs Salaries $30,000 Commissions Depreciation $0.75 5,000 Shipping 2.60 Other 10,000 0.40 f. The unit selling price of the control valve is $90. g. In February, the company plans to purchase land for future expansion. The land costs $90,000. 290 Part Two Fundamental Costing and Control h. All sales and purchases are for cash. Cash balance on January 1 equals $162,900. If the firm develops a cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage. Any cash borrowed is repaid one month later, as is the interest due. The interest rate is 12 percent per annum. Required: Prepare a monthly operating budget for the first quarter with the following schedules: 1. Sales budget 2. Production budget 3. Direct materials purchases budget 4. Direct labor budget 5. Overhead budget 6. Selling and administrative expense budget 7. Ending finished goods inventory budget 8. Cost of goods sold budget 9. Budgeted income statement (ignore income taxes) 10. Cash budget Schedule 3: Direct materials purchases budget January February March Total Part 714 Units to be produced. 24,500 Part 502 24,500 Part 714 Part 502 Part 714 Part 502 Part 714 Part 502 28,500 28,500 x 30,000 5 30,000 x 83,000 5 x 83,000 3 Dir. mat. per unit. 5 5 3 150,000 Production needs 122,500 Desired El 62.500 73,500 37.500 142,500 85,500 75,000 90,000 45,000 415,000 75,000 249,000 45,000 75.000 45.000 225,000 135,000 490,000 294,000 Total needs. 185,000 111,000 217,500 130,500 75,000 45.000 Less: Bl 50,000 30,000 62,500 37,500 150,000 90,000 50,000 440,000 30.000 264,000 Dir. mat. to purchase...... 135,000 81,000 155,000 93,000 $4 x $3 $4 $3 Cost per unit. Total cost. $4 $3 $4 $3 $600,000 $270,000 $1.760,000 $792,000 $540,000 $243,000 $620,000 $279,000
Expert Answer:
Answer rating: 100% (QA)
Here are the detailed stepbystep calculations for the Direct Materials Purchases Budget January Unit... View the full answer
Related Book For
Cost Management Accounting and Control
ISBN: 978-0324559675
6th Edition
Authors: Don R. Hansen, Maryanne M. Mowen, Liming Guan
Posted Date:
Students also viewed these accounting questions
-
Question 16 of 50 During the surrender period, an annuitant: A May cancel the annuity at no charge B Must pay a penalty for money withdrawals C Must select a method of receiving payments D Must pay...
-
Electra Manufacturing, Inc., produces control valves used in the production of oil field equipment. The control valves are sold to various gas and oil engineering companies throughout the United...
-
Will is moving from Boston to Philadelphia, which is 300 miles away. He is traveling at an average speed of 65 miles per hour. Will stops for gas after a couple of hours and wonders how much further...
-
Trade promotions refer to offers made to Group of answer choices channel members non-profit organizations businesses consumers Question 2 Consumer promotions refer to offers made to Group of answer...
-
Consider again the two tests A and B described in Exercise 2. If a student is chosen at random, what is the probability that the sum of her scores on the two tests will be greater than 200?
-
O'Neal's Men's Shops, Inc., specializes in large-size clothing. Business has been good, as indicated by the six-year growth in earnings per share. The earnings have grown from $1.00 to $1.87. a. Use...
-
Should the analysis of covenants in high-yield corporate issues be carried out separately from other characteristics?
-
Flaming Foliage Sky Tours is a small sightseeing tour company in New Hampshire. The firm specializes in aerial tours of the New England countryside during September and October, when the fall color...
-
Use the given information to prove that ARUS ATUS. R U Statement T S Given: RS ST Send To Proof SU bisects RST Send To Proof Prove: ARUS ATUS Send To Proof Reason Reason?
-
You work at DeliWine, a US wine retailer. DeliWine sources one of their best selling wines, JeanRose, from a Dutch wine distributor. The cost of placing an order is $ 513 and the annual holding cost...
-
List 5 processes in your current company that would be impacted by a power outage. Rank them in priority order (low, medium, high), with a brief explanation, to help gain an understanding of which...
-
Read the material in Appendix D: The SMART Model for Decision Making in Business . Create a table and apply the SMART model. Select at least five important criteria that you identified in Part A of...
-
Assume that Joy's Bridal uses up Cash at a rate of $120,000 per year. The interest rate is 5% and each sale of securities costs $15. What is Joy's optimal cash balance and how many times a year...
-
Channing Tate sells his farm, Magic Meander, to Chris Hemsworth for R 5000 000. Chris takes occupation of the farm. Despite a letter of demand, Chris fails to make any payments for the purchase price...
-
VIII. The cyanate ion, OCN , has three resonance structures shown below. For the Lewis structure for OCN you should take formal charges into account to find the best Lewis structure for the molecule....
-
If the average length of an automobile in the U.S. is 15 ft and the standard deviation of automobile lengths is 1.5 ft, what is the probability that a randomly selected automobile will be between...
-
You have two investment options A and B; both need $400 initial investment. Investment A will grow to $500 in three years, while investment B will give you 11% return. Assume both investments have...
-
What is beacon marketing? What are digital wallets?
-
Prague Limited commenced trading on 1 April 2017 and the company's non-current assets include two properties (Praha 1 and Praha 2), which are let to tenants who are not con- nected with the company....
-
What disclosures are required in accordance with IAS 16 when a non-current asset is revalued?
-
In what circumstances may an amount be transferred from the revaluation surplus to retained earnings?
Study smarter with the SolutionInn App