Step 3: Prepare a Manufacturing Budget( See text example Exhibits 22-7, 22-8, and 22-9 on pages 1326 – 1328)
Complete Part E- Manufacturing Budget on the budget tab by using the information found in the budgeted balance sheet above. The manufacturing budget consists of three parts, the Raw Materials Budget, the Direct Labor Budget, and the Factory Overhead Budget.
Raw Material Budget
● Consider assumption 4 while completing this critical element: The June 30 raw materials inventory is 4,600 units. The budgeted September 30 raw materials inventory is 1,980 units. Raw materials cost $ 7.75 per unit. Each finished unit requires 0.50 units of raw materials. Company policy calls for a given month ' s ending raw materials inventory to equal 20 % of the next month ' s materials requirements.
● Consider units to be produced found in the production budget while completing this critical element.
Direct Labor Budget
● Consider assumption 5 while completing this critical element: Each finished unit requires 0.50 hours of direct labor at a rate of $ 16 per hour.
● Consider units to be produced found in the production budget while completing this critical element.
Factory Overhead Budget
● Consider assumption 6 while completing this critical element: Overhead is allocated based on units of production. The predetermined variable overhead rate is $ 1.35 per unit produced. Depreciation of $ 20,000 per month is treated as fixed factory overhead.