Ramos Co. provides the following sales forecast and production budget for the next four months: April May June July Sales (units) 510 590 540 610 Budgeted production (units) 450 580 550 550 The company plans for finished goods inventory of 130 units at the end of June. In addition, each finished unit requires 6 pounds of direct materials and the company wants to end each month with direct materials inventory equal to 25% of next month’s production needs. Beginning direct materials inventory for April was 675 pounds. Direct materials cost $3 per pound. Each finished unit requires 0.60 hours of direct labor at the rate of $17 per hour. The company budgets variable overhead at the rate of $21 per direct labor hour and budgets fixed overhead of $8,100 per month. 1. Prepare a direct labor budget. 2. Prepare a factory overhead budget for April, May, and June.

1) Direct Labor Budget               April           May         June         July

production                                   450           580          550          550

* hours per unit                          0.60           0.60         0.60          0.60

= hours worked                          270           348            330             330

 * rate                                          $17            $17             $17              $17

Direct Labor Cost                   $4,590       $5,916         $5,610       $5,610

2) Factory overhead budget

Variable overhead                  $5,670        $7,308         $6,930

Fixed overhead                      $8,100         $8,100          $8,100

Total overhead budget         $13,770        $15,408        $15,030

Explanation:

Variable overhead = ( direct labor hour * $21)

April = ( 270 * $21) = 5,670

May = ( 348 * $21) = 7,308

June = ( 330 *$21) = 6,930

(1) April $4,590, May $5,916, June $5,610, July $5,610 (2) April $17,550, May $20,280, June $19,650

Explanation:

Direct Labour Budget

April. May. June. July

Budgeted production 450. 580. 550. 550

× Direct Labour hour. 0.60. 0.60. 0.60. 0.60

Budgeted Direct Labour

Hour. 270. 348. 330. 330

× Cost per Direct Labour

Hour. 17. 17. 17. 17

Budgeted Direct Labour

Cost. 4,590. 5,916. 5,610. 5,610

Factory Overhead Budget

April. May. June

Budgeted production 450. 580. 550

× Variable overhead rate 21. 21. 21

Total variable overhead. 9,450. 12,180. 11,550

Fixed overhead. 8,100. 8,100. 8,100

Total Factory Overhead. 17,550. 20,280. 19,650

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