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DSP Products Inc. makes and sells boat tarps The purchasing manager has prepared the prod

DSP Products Inc. makes and sells boat tarps. The purchasing manager has prepared the production budget for the second quarter of 2008 as follows:
 

 

April

2,500 units

 

May

4,000 units

 

June

6,800 units

 

 

 


Production for both July and August are expected to be 7,000 units each. Each completed unit of finished product requires 50 yards of a heavy-duty plastic material which costs $1.40 per yard. The company has determined that it needs 15% of next month’s raw material needs on hand at the end of each month. The company had 18,750 yards of plastic material on hand at the end of March.

It is the company’s policy to pay for one-half of a month’s direct materials purchases in the month of purchase and the remainder in the following month.

Required:
 

A.

Prepare a direct materials purchases budget for the second quarter of 2008.

B.

Assuming all cash disbursements in the month of June will be for direct materials, prepare a cash disbursements budget for the month of June.

 

 

 

120. O’Malley Inc. manufacturers a unique product. Prior to the start of July, the company’s controller estimated July’s production to be 4,000 units. Each unit requires one hour of direct labor at a cost of $10 per direct labor hour.

At the end of July, it was determined that actual production was 4,680 units and actual direct labor cost was $49,140.

Required:
 

A.

Prepare a static budget for July.

B.

Prepare a flexible budget for July

C.

Which type of budget should be compared to the actual direct labor cost for control purposes? Explain.

 

 

Jan 09 2020 View more View Less

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