Question

Required Information The following Information applies to the questions displayed below Black Diamond Company produces snow skis. Each skl requires 2 pounds of carbon fiber. The company's management predicts that 6,900 skls and 7,900 pounds of carbon fiber will be In Inventory on June 30 of the current year and that 169,000 skis will be sold during the next (thlrd) quarter. A set of two skls sells for $490. Management wants to end the third quarter with 5,400 skls and 5,900 pounds of carbon fiber In Inventory. Carbon fiber can be purchased for $18 per pound. Each skl requlres 0.5 hours of direct labor at $23 per hour. Varlable overhead is applied at the rate of $13 per direct labor hour. The company budgets fixed overhead of $1,801,000 for the quarter. Required 1. Prepare the third-quarter production budget for skis. BLACK DIAMOND COMPANY Production Budget (in units) Third Quarter Required units of available production Units to be manufactured

Answer 1

1.

Production budget

Sales (units)	169,000
+ Ending inventory of Finished Goods	5,400
Required units of available production	174,400
-Beginning inventory of Finished Goods	- 6,900
Production units	167,500

2.

Direct material budget

Budgeted production	167,500
Raw material per unit	2
Raw material consumed (Production x raw material per unit of finished goods)	335,000
+ Ending inventory of raw material	5,900
Total material requirement	340,900
- Beginning inventory of raw material	- 7,900
Raw material purchase (lb)	333,000
Cost per pound ($)	18
Budgeted cost of direct material purchase (333,000 x 18)	5,994,000

3.

Direct labor budget

Units to be produced	167,500
Labor hours per unit	0.5
Total labor hours needed (167,500 x 0.5)	83,750
Labor rate per hour	$23
Budgeted direct labor cost (83,750 x 23)	$1,926,250

4.

Factory overhead budget

Total labor hours needed	83,750
Variable overhead rate per direct labor hour	$13
Total variable overheads (83,750 x 13)	1,088,750
Fixed overheads	1,801,000
Total overheads	$2,889,750

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