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 .