Preparing Operating Budgets
The principal product of Yangsoo Enterprises, Inc., is a multipurpose hammer that carries a lifetime guarantee. Listed next are cost and production data for the Yangsoo hammer.
Direct materials
Anodized steel: 2 kilograms per hammer at $1.60 per kilogram
Leather strapping for the handle: 0.5 square meter per hammer at $4.40 per square meter
Direct labor
Forging operation: $12.50 per labor hour; 6 minutes per hammer
Leather-wrapping operation: $12.00 per direct labor hour; 12 minutes per hammer Overhead
Forging operation: rate equals 70 percent of department’s direct labor dollars
Leather-wrapping operation: rate equals 50 percent of department’s direct labor dollars In October, November, and December, Yangsoo Enterprises expects to produce 108,000, 104,000, and 100,000 hammers, respectively. The company has no beginning or ending balances of direct materials inventory or work in process inventory for the year.
Required
1. For the three-month period ending December 31, prepare monthly production cost information for the Yangsoo hammer. Classify the costs as direct materials, direct labor, or overhead, and show your computations.
2. Prepare a cost of goods manufactured budget for the hammer. Show monthly cost data and combined totals for the quarter for each cost category.