Raw Materials Purchasing Budget

Each unit of SUPER DUPER widget requires $0\mathrm{.}8$ pounds of WHAM compound. To

prevent shortages, the company would like the inventory of WHAM compound on hand

at the end of each month to equal $30\%$ of the following month's production needs.

The inventory on July $1$ is $2,004$ pounds.

WHAM compound costs $$5\mathrm{.}00$ per pound and Vaughan pays for $70\%$ of its purchases

in the month of purchase; the remainder is paid in the following month. $$50,400$

of WHAM compound was purchased in June and $70\%$ was paid for in June.

Vaughan Company

RM Purchasing Budget Total

$3$rd Quarter July August September $3$rd Quarter

Required Production $7,350-$

RM per Unit $30\%$

Production Needs

Add: Desired Ending Inventory

Total Needs

Less: Beginning Inventory

RM to be Purchased

Cost of RM per pound

Cost of RM to be Purchased

Cash Disbursements for RM $2$

June's RM Purchases

July's RM Purchases

August's RM Purchases

September's RM Purchases

Total Disbursements

The next Budget is the Direct Labor Budget. Let's assume that each unit takes

$0\mathrm{.}6$ DLH to make and each DLH costs $$15.$ Let's further assume that labor is paid

in the month incurred.

Vaughan Company

DL Budget Total

$3$rd Quarter July August September $3$rd Quarter

Budgeted Production in Units

DLH per Unit

Total DLH needed

Cost per DLH

Total Direct Labor Cost

Next we will prepare our FOH budget. FOH is applied based on DLH$.$ Estimated

variable FOH is expected to be $$420,000$ and estimated DLH are expected to be

$300,000.$ Fixed FOH is estimated to be $$9,100$ per month with $$2,000$ of that amount

being depreciation of factory equipment and building. Like DL$,$ assume that FOH is

paid in the month incurred.

Vaughan Company

FOH Budget Total

$3$rd Quarter July August September $3$rd Quarter

Budgeted DLH

Variable FOH rate

Total Budgeted Variable FOH

Total Budgeted Fixed FOH

Total Budgeted FOH

Less: Depreciation

Cash Needed for FOH

$2$

Total FOH per Budget

Budgeted DLH this period

Predetermined FOH per DLH

Now we need to prepare the Ending FG Inventory Budget.

Company

Ending FG Inventory Budget $3$rd Quarter Quantity Cost Total

Cost Per Unit: $2$

Direct Materials

Direct Labor

FOH

Unit Cost

Ending Inventory in Units

Cost Per Unit

Ending FG Inventory