The Deluxe Motorcar in northern California manufactures motor cars of all categories. Its budgeted sales for...

 

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The Deluxe Motorcar in northern California manufactures motor cars of all categories. Its budgeted sales for the most popular sedan model XE8 in 20x8 is 4,000 units. Deluxe Motorcar has a beginning finished inventory of 600 units. Its ending inventory is 450 units. The present selling price of model XE8 to the distributors and dealers is $35,200. The company does not want to increase its selling price in 20x8. Deluxe Motorcar does not produce tyres. It buys the tyres from an outside supplier. One complete car requires five tyres including the tyre for the extra wheel. The company's target ending inventory is 400 tyres, and its beginning inventory is 350 tyres. The budgeted purchase price is $45 per tyre. Required: 1. Compute the budgeted revenucs in dollars. (1.5 Marks) 2. Compute the number of cars that Deluxe Motorcar should produce. (2.5 Marks) 3. Compute the budgeted purchases of tyres in units and in dollars. (3.5 Marks) 4. What actions can Deluxe Motorcar's managers take to reduce budgeted purchasing costs of tyres assuming the same budgeted sales for Model XE8? (3 Marks) 5. Describe some of the drawbacks of using the operating budget as a control device. (3 Marks) 6. Describe the concept of kaizen budgeting. (3 Marks) The Deluxe Motorcar in northern California manufactures motor cars of all categories. Its budgeted sales for the most popular sedan model XE8 in 20x8 is 4,000 units. Deluxe Motorcar has a beginning finished inventory of 600 units. Its ending inventory is 450 units. The present selling price of model XE8 to the distributors and dealers is $35,200. The company does not want to increase its selling price in 20x8. Deluxe Motorcar does not produce tyres. It buys the tyres from an outside supplier. One complete car requires five tyres including the tyre for the extra wheel. The company's target ending inventory is 400 tyres, and its beginning inventory is 350 tyres. The budgeted purchase price is $45 per tyre. Required: 1. Compute the budgeted revenucs in dollars. (1.5 Marks) 2. Compute the number of cars that Deluxe Motorcar should produce. (2.5 Marks) 3. Compute the budgeted purchases of tyres in units and in dollars. (3.5 Marks) 4. What actions can Deluxe Motorcar's managers take to reduce budgeted purchasing costs of tyres assuming the same budgeted sales for Model XE8? (3 Marks) 5. Describe some of the drawbacks of using the operating budget as a control device. (3 Marks) 6. Describe the concept of kaizen budgeting. (3 Marks)

Answer rating: 100% (QA)

Solution Calculation of Production Budget of motor car sedan model Units Budgeted sales of sedan model 4000 Ending inventory 450 Opening inventory 600 ... View the full answer