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Exam #4-Chapter 23-Additional Information Questions #19 #40 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 direct labor hour Variable Overhead, 6 machine hours per unit @ $5.00 per machine hour Fixed overhead costs are estiamted 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 Additional information will be given in the questions. Prepare a production budget and a direct materials purchase budget

Solution

Orville Company Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Quarter 1,2018 Sales 4000 6000 8000 7000 25000 5000 Add: Finished goods Inventory 1500 2000 1750 1250 1250 Total Needs 5500 8000 9750 8250 26250 Less: Beginnning Inventory 1000 1500 2000 1750 1000 Production 4500 6500 7750 6500 25250 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Production 4500 6500 7750 6500 25250 Direct Material required Per Units(in Pounds) 7 7 7 7 7 Total Direct Material Required 31500 45500 54250 45500 176750 Production 4500 6500 7750 6500 25250 Machine Hours Required Per Unit 4 4 4 4 4 Total Direct Material Required 18000 26000 31000 26000 101000 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Fixed Overhead Cost 303000 303000 303000 303000 1212000