PROBLEM SET C
The Newark Company manufactures exotic wood cutting boards for use in the home kitchen.
Newark is preparing its master budget for the third calendar quarter of 2006. The company
expects to sell 5,000 boards in July, 5,500 boards in August, 6,200 boards in September, and
7,000 boards in October. The retail sales price for each board is $20.00. The company’s
inventory policy requires that the number of cutting baords that must be on hand at the end of
each month must be equal to 40% of next month’s sales needs. The number of actual cutting
boards on hand on July 1, 2006 is 3,000 boards.
Prepare separate production budgets for the Newark Company for July, August, and
September, 2006, as well as a production budget summarizing the entire calendar
The Mason Company is preparing its master budget for the third calendar quarter of 2006. The
company manufactures exotic cutting boards for use in the home kitchen. The company has
estimated that it needs to produce 6,700 cutting boards in July of 2006, 7,300 boards in August,
8,200 boards in September, and 9,000 boards in October. Each cutting board requires 3 board
feet of lumber at a cost of $1.20 per board foot. Each board also requires 30-minutes of direct
labor at an average direct labor cost of
$14.00 per hour. Factory overhead is applied at a rate of
130% of direct labor cost.
The amount of depreciation expense budgeted per month tied up in
factory overhead is $3,000 per month.
Prepare the direct materials budget, the direct labor budget, and the applied factory
overhead budget for each month in the third calendar quarter. Each budget should also
have a column for the calendar total as well as the three monthly totals.