Hazlett, Inc., operates at capacity and makes plastic combs and hairbrushes. Although the combs and brushes are a matching set, they are sold individually and so the sales mix is not 1:1. Hazlett's management is planning its annual budget for fiscal year 2013. Here is information for 2013:

Input Prices

Direct materials

Plastic ...................................................... $ 0.30 per ounce

Bristles ...................................................... $ 0.75 per bunch

Direct manufacturing labor .... $18 per direct manufacturing labor-hour

Hazlett accounts for direct materials using a FIFO cost flow.

Hazlett uses a FIFO cost flow assumption for finished goods inventory.
Combs are manufactured in batches of 200, and brushes are manufactured in batches of 100. It takes 20 minutes to set up for a batch of combs, and 1 hour to set up for a batch of brushes.
Hazlett uses activity-based costing and has classified all overhead costs as shown in the following table. Budgeted fixed overhead costs vary with capacity. Hazlett operates at capacity so budgeted fixed overhead cost per unit equals the budgeted fixed overhead costs divided by the budgeted quantities of the cost allocation base.

Delivery trucks transport units sold in delivery sizes of 1,000 combs or 1,000 brushes.
Required
Do the following for the year 2013:
1. Prepare the revenues budget.
2. Use the revenue budget to
a. find the budgeted allocation rate for marketing costs.
b. find the budgeted number of deliveries and allocation rate for distribution costs.
3. Prepare the production budget in units.
4. Use the production budget to
a. find the budgeted number of setups, setup-hours, and the allocation rate for setup costs.
b. find the budgeted total machine-hours and the allocation rate for processing costs.
c. find the budgeted total units produced and the allocation rate for inspection costs.
5. Prepare the direct material usage budget and the direct material purchases budgets in both units and dollars; round to whole dollars.
6. Use the direct material usage budget to find the budgeted allocation rate for materials-handling costs.
7. Prepare the direct manufacturing labor cost budget.
8. Prepare the manufacturing overhead cost budget for materials handling, setup, processing, and inspection costs.
9. Prepare the budgeted unit cost of ending finished goods inventory and ending inventories budget.
10. Prepare the cost of goods sold budget.
11. Prepare the nonmanufacturing overhead costs budget for marketing and distribution.
12. Prepare a budgeted income statement (ignore income taxes).
13. What questions might the CEO ask the management team when reviewing the budget?
14. How does preparing the budget help Hazlett's management team better manage the company?

Transcribed Image Text:

Input Quantities per Unit of Output Combs Brushes Direct materials Plastic 5 ounces 8 ounces 16 bunches Bristles Direct manufacturing labor 0.05 hours 0.2 hours 0.1 MH Machine-hours (MH) 0.025 MH Inventory Information, Direct Materials Plastic Bristles Beginning inventory 1,600 ounces 1,820 bunches 2,272 bunches Target ending inventory 1,766 ounces Cost of beginning inventory $456 $1,419 Sales and Inventory Information, Finished Goods Combs Brushes Expected sales in units 12,000 14,000 Selling price $ 30 Target ending inventory in units 1,200 1,400 Beginning inventory in units 600 1,200 Beginning inventory in dollars $ 2,700 $27,180