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Cost II Assignment I

The document provides information to prepare budgets for Hansell Company's duraflex product for July and August 2010. It includes expected sales volumes, production requirements, materials costs, direct labor rates and overhead costs. Students are asked to prepare 6 specific budgets for July based on this data: [1] a sales budget in dollars, [2] a production budget in units, [3] another production budget for August in units, [4] a materials purchases budget for July in pounds, [5] the same materials budget but in dollars, and [6] a direct manufacturing labor budget for July in dollars.

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Tariku Kolcha
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101 views

Cost II Assignment I

The document provides information to prepare budgets for Hansell Company's duraflex product for July and August 2010. It includes expected sales volumes, production requirements, materials costs, direct labor rates and overhead costs. Students are asked to prepare 6 specific budgets for July based on this data: [1] a sales budget in dollars, [2] a production budget in units, [3] another production budget for August in units, [4] a materials purchases budget for July in pounds, [5] the same materials budget but in dollars, and [6] a direct manufacturing labor budget for July in dollars.

Uploaded by

Tariku Kolcha
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Wolaita Sodo University

College of Business and Economics


Accounting and Finance Department
Cost and Management Accounting II Assignment I

Hansell Company’s management wants to prepare budgets for one of its products, duraflex, for
July 2010. The firm sells the product for $80 per unit and has the following expected sales (in
units) for these months in 2010:

April May June July August September

5,000 5,400 5,500 6,000 7,000 8,000

The production process requires 4 pounds of dura-1000 and 2 pounds of flexplas. The firm’s
policy is to maintain an ending inventory each month equal to 10 percent of the following
month’s budgeted sales, but in no case less than 500 units. All materials inventories are to be
maintained at 5 percent of the production needs for the next month, but not to exceed 1,000
pounds. The firm expects all inventories at the end of June to be within the guidelines. The
purchase department expects the materials to cost $1.25 per pound and $5.00 per pound for dura-
1000 and flexplas, respectively.

The production process requires direct labor at two skill levels. The rate for labor at the K102
level is $50 per hour and for the K175 level is $20 per hour. The K102 level can process one
batch of duraflex per hour; each batch consists of 100 units. The manufacturing of duraflex also
requires one-tenth of an hour of K175 workers’ time for each unit manufactured.

Variable manufacturing overhead is $1,200 per batch plus $80 per direct labor-hour. The
company uses an actual cost system with a LIFO cost-flow assumption.

Required On the basis of the preceding data and projections, prepare the following budgets:

a. Sales budget for July (in dollars).


b. Production budget for July (in units).
c. Production budget for August (in units).
d. Direct materials purchases budget for July (in pounds).
e. Direct materials purchases budget for July (in dollars).
f. Direct manufacturing labor budget for July (in dollars).

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