Space Company has developed the following standards relating to production of their finished units:

Direct Materials, 20 pounds per unit @ $.80 per pound

Direct labor, 5 hours per unit @ $15 per hour Variable Overhead,

3 machine hours per unit @ $8 per machine hour

Annual fixed overhead costs are estimated at $679,800. The expected selling price is $180 per unit. Selling and administrative costs are expected to be $6 per unit variable and $230,000 (per year) fixed.

The following sales forecast is available for 2017: First Quarter 8,000 units; Second Quarter 10,000 units; Third Quarter 9,000 units; and Fourth Quarter 14,000 units. The expected sales in the First Quarter of 2018 are 9,000 units. Management policy is to maintain a finished goods inventory equal to 20% of the next quarter's sales and a raw materials inventory equal to 30% of the next quarter's production requirement. The beginning inventories of the first quarter of the year 2017 are expected to meet these same requirements.

REQUIRED:

A. Prepare a production budget by quarters for the year 2017.

B. Prepare a direct materials budget for the first TWO quarters of 2017 only.

C. Compute the following amounts:

1. What is the budgeted ANNUAL production for the year 2017?

2. What are the budgeted ANNUAL machine hours needed for production for the year 2017?

3. What are the budgeted ANNUAL fixed overhead costs for the year 2017?

4. Based on machine hours, what is the pre-determined fixed overhead rate for the year 2017? 5. What is the total expected cost to produce a finished unit?

D. Compute the following amounts for the FIRST QUARTER of 2017 only

1. What is the budgeted direct labor cost?

2. What is the budgeted variable overhead cost?

3. What is the budgeted fixed overhead cost (assume costs are incurred evenly throughout the year)?

4. What is the budgeted TOTAL selling and administrative cost (assume the fixed costs are incurred evenly througout the year)?

5. What are the total budgeted sales (in dollars)?

6. What is the budgeted cost of goods sold?

7. What is budgeted net income?

8. What is the expected balance at the end of the quarter of raw materials (in dollars)?

9. What is the expected balance at the end of the quarter of finished goods (in dollars)?

10. What amount of fixed overhead cost will be applied to production during the quarter?

E. What amount of fixed overhead cost will be applied to production for the year?