ANSWER A-E

Orville Company has developed the following standards relating to the production of their finished units: Direct Materials, 7 pounds per unit @ $3.00 per pound Direct Labor, 4 hours per unit @ $20 per labor hour Variable Overhead, 6 machine hours per unit @ $5 per machine hour Fixed overhead costs are estimated at $303,000 each quarter. The expected selling price is $250 per unit. Selling and administrative costs are expected to be $2 per unit variable and $120,000 fixed each quarter.

The following sales forecast is available for the year 2017: First Quarter 4,000 units; Second Quarter 6,000 units; Third Quarter 8,000 units; and Fourth Quarter 7,000 units. The expected sales in the First Quarter of the year 2018 are 5,000 units. Any beginning inventories for the year meet the same requirements that management has for inventories in the current year.

A.How many machine hours are expected to be USED for production for the year?

B.What is the pre-determined fixed overhead rate based on machine hours?

C. What is the total expected manufacturing cost of a finished unit?

D. If management requires a raw materials inventory equal to 10% of the next quarter's materials required for production, prepare a materials purchase budget for JUST the first TWO quarters of the year. What is the cost of the materials expected to be purchased in the first quarter?

E. Using your materials purchases budget, what is the expected cost of the materials to be purchased in the second quarter?