ACC301

Q 1 Prepare a Direct Material Budget from the following information:

Required production units 7,000

Direct material required per unit 0.5 pounds

There were 500 pounds of direct material in the beginning of the month

Desired ending Direct Material 650 pounds

Cost of Direct Material is $ 4.5 / lb

Answer

Q 2 ABC Company limited produces coat racks. The projected sales for the first quarter of the coming year and the beginning and ending inventory data are as follows:

The coat racks are molded and then painted. Each rack requires four pounds of metal, which cost SAR 2.50 per pound. The beginning inventory of materials is 4,000 pounds. ABC Company Limited wants to have 6,000 pounds of metal in inventory at the end of the quarter. Each rack produced requires 30 minutes of direct labor time, which is billed at SAR 9 per hour.

Required:

1. Prepare a sales budget for the first quarter.

2. Prepare a production budget for the first quarter.

3. Prepare a direct materials purchases budget for the first quarter.

4. Prepare a direct labor budget for the first quarter.

Answer

Q 3 Abdullah, Inc. has projected sales of its product for the next 6 months as follows:

July 120 units

August 270

September 300

October 240

November 90

December 210

The product sells for $100 per unit, variable expenses are $30 per unit, and fixed expenses are $1,500 per month. The finished product requires 3 units of raw material and 10 hours of direct labor. The company tries to maintain an ending inventory of finished goods equal to the next 2 months of sales.

a. Prepare a production budget for August, September, and October.

b. Prepare a direct labor hours budget for August, September, and October

c. Prepare direct material budget for August, September, and October

Answer

Q 4 Ibrahim Shop sells a variety of Toys. In a recent month, it’s accounting information system revealed the following information:

Budget Actual

Units 2,500 3,200

Sales revenue $10,000 $12,000

Variable product costs 1,200 2,000

Fixed manufacturing costs 800 700

Variable selling costs 1,500 1,400

Fixed nonmanufacturing costs 500 600

a. Calculate the following variances:

Revenue budget variance

Sales price variance

Revenue sales quantity variance

b. Suggest two reasons why managers might be interested in investigating one or more of the variances in part (a).

Answer