E22-25

Preparing an operating budget

Grady, Inc, manufacturers model airplane kits and projects production at 350, 425, 450, and 500 kits per quarter. direct materials are $6 per kit. Indirect materials are considered insignificant and are not included in the budgeting process. Big inning raw material inventory is $600, find the company desires to end each quarter with 20% off the material needed for the next month's production. Grady desires a balance of $600 in raw material inventory at the end of the fourth quarter. each kit requires 0.25 hours of direct labor at an average cost of $20 per hour. Manufacturing overhead is I located using direct labor hours as the allocation base. Variable overhead is $0.50 pair kit and fixed overhead is $129 per quarter. Prepare Grady's Direct materials budgets , direct labor budget, and manufacturing overhead budget for the year. Round the direct labor hours needed for production, budgeted overhead costs, and predetermined overhead allocation rate to two decimal places.