Black diamond company produces snow skis. each ski requires 4 pounds of carbon fiber. the company’s management predicts that 6,600 skis and 7,600 pounds of carbon fiber will be in inventory on june 30 of the current year and that 166,000 skis will be sold during the next (third) quarter. a set of two skis sells for $460. management wants to end the third quarter with 5,100 skis and 5,600 pounds of carbon fiber in inventory. carbon fiber can be purchased for $15 per pound. each ski requires 0.4 hours of direct labor at $20 per hour. variable overhead is applied at the rate of $10 per direct labor hour. the company budgets fixed overhead of $1,798,000 for the quarter. prepare the third-quarter production budget for skis.

Production Budget

sales for the third quarter           166,000

desired ending inventory               5, 100

total skies requirement                171,  100

beginning finished product           (6,600)

ski to be produced                       164,500

Explanation:

We are asked for the production budget for skis. Any data which doesn't relates to skis is not relevant.

Production Budget

sales for the third quarter           166,000

desired ending inventory               5, 100

total skies requirement                171,  100

beginning finished product           (6,600)

ski to be produced                       164,500

The sales + desired ending inventory.

This are the total requirement for the third quarter.

We subtract the beginning inventory because, those units are already in our finished goods inventory, so it decrease our production needs.

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