Butler, Inc., operates at capacity and makes wooden playground equipment. Although Butlers swing sets and play forts

Question:

Butler, Inc., operates at capacity and makes wooden playground equipment. Although Butler’s swing sets and play forts are a matching set, they are sold individually and so the sales mix is not 1:1. Butler’s management is planning its annual budget for fiscal year 2021. Here is information for 2021:

Input Prices Direct materials Wood Chain Direct manufacturing labor Input Quantities per Unit of Output

Butler accounts for direct materials using a FIFO cost flow assumption.

Sales and Inventory Information, Finished Goods Expected sales in units Selling price Target ending inventory

Butler uses a FIFO cost-flow assumption for finished-goods inventory.
Swing sets are manufactured in batches of 20, and play forts are manufactured in batches of 10. It takes 2 hours to set up for a batch of swing sets and 1 hour to set up for a batch of play forts. Butler uses activity-based costing and has classified all overhead costs as shown in the following table. Budgeted fixed overhead costs vary with capacity. Butler 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.

Cost Type Manufacturing Materials handling Setup Processing Inspection Operating (nonmanufacturing) Marketing

Delivery trucks transport either 10 swing sets or 5 play forts in each delivery.

Required

1. Prepare the revenues budget.
2. Use the revenues budget to do the following:
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 find the following:
a. The budgeted number of setups and setup-hours and the allocation rate for setup costs.
b. The budgeted total machine-hours and the allocation rate for processing costs.
c. The budgeted total units produced and the allocation rate for inspection costs.
5. Prepare the direct material usage budget and the direct material purchases budget 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 operating (nonmanufacturing) overhead costs budget for marketing and distribution.
12. Prepare a budgeted operating income statement (ignore income taxes).
13. How does preparing the budget help Butler’s management team better manage the company?