Chp 22 Test Review

Black Diamond Company produces snow skis. Each ski requires 1 pounds of carbon fiber. The companys management predicts that 6,500 skis and 7,500 pounds of carbon fiber will be in inventory on June 30 of the current year and that 165,000 skis will be sold during the next (third) quarter. A set of two skis sells for $450. Management wants to end the third quarter with 5,000 skis and 5,500 pounds of carbon fiber in inventory. Carbon fiber can be purchased for $14 per pound. Each ski requires 0.5 hours of direct labor at $19 per hour. Variable overhead is applied at the rate of $9 per direct labor hour. The company budgets fixed overhead of $1,797,000 for the quarter.

Required: 1. Prepare the third-quarter production budget for skis.

BLACK DIAMOND COMPANY
Production Budget (in units)
Third Quarter
Required units of available production
Units to be manufactured

2. Prepare the third-quarter direct materials (carbon fiber) budget; include the dollar cost of purchases.

BLACK DIAMOND COMPANY
Direct Materials Budget
Third Quarter
Budgeted production
Materials needed for production (lbs.)
Total materials requirements (lbs.)
Direct materials to be purchased (lbs.)
Budgeted cost of direct materials purchases

3. Prepare the direct labor budget for the third quarter.

BLACK DIAMOND COMPANY
Direct Labor Budget
Third Quarter
Units to be produced
Total labor hours needed
Budgeted direct labor cost

4. Prepare the factory overhead budget for the third quarter.

BLACK DIAMOND COMPANY
Factory Overhead Budget
Third Quarter
Total labor hours needed