Prepare the production budget (in meters) for the bimesters ending February 29th; Prepare the direct-labor budget (in hours and in dollars) for the same bimestre; Prepare the direc... Prepare the production budget (in meters) for the bimesters ending February 29th; Prepare the direct-labor budget (in hours and in dollars) for the same bimestre; Prepare the direct material purchase budget (in grams and in dollars) for January only, considering that the desired monthly ending inventory of raw material should cover 110% of the following month’s production needs. Read more

Steps to Solve

1. Calculate Ending Inventory for January The desired ending inventory for January is 60% of February's estimated sales.

   • Sales in February: 18,000 meters
   • Ending Inventory for January = ( 0.6 \times 18,000 , \text{meters} = 10,800 , \text{meters} )

2. Calculate Production Needs for January To find the production needs, use the formula: $$ \text{Production} = \text{Sales} + \text{Ending Inventory} - \text{Beginning Inventory} $$

   • Sales in January: 15,000 meters
   • Beginning Inventory for January: Assume it is 0 for simplicity in the first month.
   • Production = ( 15,000 + 10,800 - 0 = 25,800 , \text{meters} )

3. Calculate the Direct-Labor Budget for January in Hours Each meter of film requires 0.05 labor hours.

   • Labor Hours Needed = ( 25,800 \times 0.05 = 1,290 , \text{hours} )

4. Calculate the Direct-Labor Budget in Dollars The cost per labor hour is $22.

   • Labor Budget = ( 1,290 \times 22 = 28,380 , \text{dollars} )

5. Calculate Raw Material Needs for January in Grams Each meter requires 2 grams of raw material.

   • Raw Material Needed = ( 25,800 \times 2 = 51,600 , \text{grams} )

6. Calculate Raw Material Cost for January Each gram of raw material costs $0.2.

   • Raw Material Cost = ( 51,600 \times 0.2 = 10,320 , \text{dollars} )