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Chapter 22: 6SE (page 1229)

Preparing an operating budget—direct labor budget Baker Company expects to produce 2,050 units in January and 1,994 units in February. Baker budgets five direct labor hours per unit. Direct labor costs average $9 per hour. Prepare Baker’s direct labor budget for January and February.

Short Answer

Expert verified

The budgeted cost of direct labor for January and February is 92,250 and 89,730 respectively.

Step by step solution

01

Meaning of direct labor budget

The budget that is prepared to calculate the direct labor hours and related costs to fulfill production requirements is known as the direct labor budget.

02

Preparation of sales budget for January and February

Particulars

January

February

Budgeted units to be produced

2,050

1,994

Direct labor hour per unit

x 5

x 5

Direct labor needed for production

10,250

9,970

Direct labor cost per unit

$9

$9

Budgeted cost of direct materials purchases

$92,250

$89,730

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Most popular questions from this chapter

Why is the sales budget considered the cornerstone of the master budget?

Question: One benefit of budgeting is coordination and communication. Explain what this means.

Preparing an operating budget—cost of goods sold budget

Refer to the budgets prepared in Exercise E22-24. Determine the cost per kit to manufacture the model airplane kits. Grady projects sales of 100, 150, 100, and 200 kits for the next four quarters. Prepare a cost of goods sold budget for the year. Grady has no kits in beginning inventory. Round amounts to two decimal places.

Preparing an operating budget—manufacturing overhead budget Bennett Company expects to produce 2,030 units in January that will require 8,120 hours of direct labor and 2,210 units in February that will require 8,840 hours of direct labor. Bennett budgets \(10 per unit for variable manufacturing overhead; \)2,100 per month for depre000ciation; and $78,460 per month for other fixed manufacturing overhead costs. Prepare Bennett’s manufacturing overhead budget for January and February, including the predetermined overhead allocation rate using direct labor hours as the allocation base.

Preparing an operating budget—sales and production budgets

Lugo Company manufactures drinking glasses. One unit is a package of eight glasses, which sells for $30. Lugo projects sales for April will be 2,000 packages, with sales increasing by 250 packages per month for May, June, and July. On April 1, Lugo has 325 packages on hand but desires to maintain an ending inventory of 20% of the next month’s sales. Prepare a sales budget and a production budget for Lugo for April, May, and June.
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