Assignment Task: A company expects to produce 2,800 units in January and 3,900 units in February. The company has the following budget information for both months.
The company budgets $50 per unit for direct materials. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is $37,950. The company desires the ending balance in Raw Materials Inventory to be 60% of the next month's direct materials needed for production. Desired ending balance for February is $51,000.
The company budgets that each unit requires 45 minutes of direct labour to complete. The direct labour rate is $90 per hour.
The company uses direct labour hours as the cost allocation base to allocate total manufacturing overhead. Variable manufacturing overhead cost per unit is $40. Monthly fixed manufacturing overhead cost is $74,900 including depreciation, $4,200.
Required:
1. Calculate the cost of budgeted purchases of direct materials needed for January.
2. Calculate the budgeted cost of direct labour for January.
3. Calculate the budgeted/predetermined overhead allocation rate for January.
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