| Front leg Chocolate Company manufactures and sells premium chocolate called PremiumChoco. The following | |||||||||
| data are available for preparing budgets for PremiumChoco for June through August of 2020. | |||||||||
| 1. Sales: June , 30,000 pounds; July, 56,000 pounds, August 58,000 pounds. | |||||||||
| 2. Direct materials: each pound of PremiumChoco requires 5 pounds of cacao seeds at a cost of $2.95 per | |||||||||
| pound and 4 pounds of cane sugar at $.50 per pound. | |||||||||
| 3. Desired inventory levels: | |||||||||
| Type of Inventory | May 1 | June 1 | July 1 | August 1 | |||||
| PremiumChoco (pounds) | 7,000 | 8,000 | 15,000 | 18,000 | |||||
| cacao seeds (pounds) | 6,000 | 9,000 | 10,000 | 13,000 | |||||
| cane sugar (pounds) | 5,000 | 14,000 | 20,000 | 25,000 | |||||
| 4. Direct labor: direct labor time is 30 minutes per pound at an hourly rate of $20 per hour. | |||||||||
| 5. Selling and administrative expenses are expected to be .05 cents per unit sold plus $82,000 per month. | |||||||||
| 6. Your assistant has prepared two budgets: (1) The manufacturing overhead budget shows expected | |||||||||
| costs to be 150% of direct labor cost (all variable costs). | |||||||||
| 7. The company uses a 30% markup percentage on total cost | |||||||||
| 8. Interest Expense is $150,000. | |||||||||
| 9. Income taxes are expected to be 21% of income before income taxes. | |||||||||
| Instructions | |||||||||
| 1) Prepare the direct labor budget. | |||||||||
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