Acct2000 - Ch. Written Assignment Session No Name Class No 43 Student no Date Problem! Lubriderm Corporation as the following budgeted unit tales for the next six-month period Month Unit Sales June 90,000 July 120,000 August 210.000 September 350,000 October 180.000 November 120.000 There were 30.000 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished products that cqual 20% of the unit cales for the next month Five pounds of materials are required for each unit produced. Each pound of material costs 8 in June, 59 in July and $10 in August. Inventory levels for materials are equal to 30% of the needs for the next month Materials inventory on June I was 15.000 pounds. Required: Prepare a Production Badgets in units for July and August b. Prepare a Direct Material Usage Budget for July and August Prepare a Direct Material Purchases Budget for July and August il. Production Budget (in units) for the month of July August 22 Budgeted sales Add: Required ending inventory Total inventory requirements Less: Beginning inventory Budgeted production 138,000 198.000 Cont'd Problem! b. Direct Material Usage Budget in Quantity and Dollars July Physical Units Budget Pounds Direct materials required for production August Pounds Total quantity of direct material to be used Cost Budget Available from beginning direct materials inventory (under a FIFO cost-flow assumption) To be purchased this period S6,003.000 $9.603,000 Direct materials to be used this period Direct Material Purchases Budget July Pounds Physical Units Budget To be used in production August Pounds 9900 Add target ending inventory 234... 25 12. Total requirements Deduct beginning inventory (294000) Purchases to be made 78. Cost Budget Direct materials To per mit Total cost of Purchase $7,020.000 $9,270,000 Problem 2 Comprehensive problem with ABC costing. Animal Gear Company makes two pet camers, the Cat-allao and the Dog-eniffic. They are both made of plastic with metal doors, but the Cat-allac is smaller. Information for the two products for the month of April is given in the following tables. Input Prices Direct materials Plastic 55 per pound Metal 54 per pound Direct manufacturing labor S10 per direct manufacturing laborbour Inpur Quantities per Unit of Output Cat-alinc Dog-entic Direct materials Plastic Metal Direct manufacturing labor hours Machine-hours (MH) 4 pounds 0.5 pounds 3 hours 11 MH 6 pounds 1 pound 5 hours 19 MH Inventory Information Direct Materials Beginning inventory Target ending inventory Cost of beginning inventory Plastic 290 pounds 410 pounds SL.102 Metal 70 pounds 65 pounds 5217 Animal Gear accounts for direct materials using a FIFO cost-flow assumption. Sales and Inventory Information. Finished Goods Cat-allac Dog-eriffic Expected sales in units 530 225 Selling price $ 205 $ 310 Target ending inventory in units 30 10 Beginning inventory in units 10 19 Beginning inventory in dollars $1,000 S4 650 Animal Gear uses a FIFO cost-flow assumption for finished-goods inventory Animal Gear uses an activity-based costing system and classifies overhead into three activity pools: Setup, Processing, and Inspection. Activity rates for these activities are $105 per setup-hour, Sio per -machine-hour, and $15 per inspection-bour, respectively. Other information follows: Cost-Driver Information Cat-allas Number of units per batch 25 Setup time per batch 1.50 hours Inspection time per batch 0.5 hour Dog-eriffic 9 1 75 hours 0.7 hour If necessary, round up to calculate number of batches. Notimanufacturing fixed costs for March equal $32,000, half of which are salaries. Sularies are expected to increase 5% in April Other nonmanufacturing fixed costs will remain the same. The only variable nonmanufacturing cost is sales commission, equal to 1% of sales revenue Prepare the following for April: Required: 1. Revenues budget 2. Production budget in units 3. Direct material usage budget and direct material purchases budget 4. Direct manufacturing labor cost budget 5. Manufacturing overhead cost budgets for each of the three activities 6 Budgeted unit cost of ending finished-goods inventory and ending inventories budget 7 Cost of goods sold budget 8. Nonmanufacturing costs budget 9. Budgeted income statement (ignore income taxes) 10. How does preparing the budget help Animal Gear's management team better manage the company Comprehensive problem with ABC costing 1 Revenue Budget For the Month of April Units Selling Price Total Revenues Cat-allac / os Dog-eriffic Total 225 5178,400 2 Production Budget For the Month of April Product Cat-allac Dog-eriffie 53 30 226 To Budgeted unit sales Add target ending finished goods inventory Total required units Deduct beginning finished goods inventory Units of finished goods to be produced 235 950 216 Total Direct Material Usage Budget in Quantity and Dollars For the Month of April Material Plastic Metal Physical Units Budget Direct materials required for Cat-allac -5 Dog-erific 2118 Total quantity of direct material to be used Cost Budget Available from beginning direct materials inventory (under a FIFO cost-flow assumption) Plastic Metal: 203 To be purchased this period Plastic Metal: LED 4 Direct materials to be used this period 27 15.87 $19,033 16.150 Direct Material Purchases Budget For the Month of April Material Plastic Metal Total Physical Units Budget 19 1 To be used in production (requirement 3) Add target ending inventory Total requirements Deduct beginning inventory Purchases to be made SS Cost Budget Plastic Metal: $20,024 Purchases 15 Direct Manufacturing Labor Costs Budget For the Month of April Output Units Produced DMLH Total Hourly Wage (requirement 2) Hours Rate Total per Unit Cat-allac Dog.crillic Total 16610 13.00 $27,300 5. Machine Setup Overhead Total Cat-allac Dog-eriffic 216 9 550 Units to be produced Units per batch Number of batches (rounded up) Setup time per batch Total setup time 75 hrs. Budgeted machine setup costs 165 x 15 ES Processing Overhead Budgeted machine-hours (MH) - 10 4516: Saw Budgeted processing costs Inspection Overhead Budgeted inspection-hours Budgeted inspection costs Manufacturing Overhead Budget For the Month of April Machine setup costs Processing costs Inspection costs Total costs 6 Unit Costs of Ending Finished Goods Inventory April 30 Product Cat-allac Dog-erillic Input per Input per Unit of Unit of Unit of Input Output Total Output Total Cost per Plastic Metal Direct manufacturing labor Machine setup Processing Inspection Total $168.60 $296.20 Ending Inventories Budget April 30 Quantity Cost per unit Total Direct Materials Plastic Metals Finished goods Cat-allac Dog.eriffic Total ending inventory $10,330 Cost of Goods Sold Budget For the Month of April Beginning finished goods inventory, April, 1 Direct materials used (requirement 3) Direct manufacturing labor (requirement 4) Manufacturing overhead (requirement 5) Cost of goods manufactured Cost of goods available for sale Deduct: Ending finished goods inventory, April 30 (requirement 6) Cost of goods sold S153795 Nonmanufacturing Costs Budget For the Month of April Salaries Other fixed costs Sales commissions Total nonmanufacturing costs 9 Budgeted Income Statement For the Month of April Revenues Cost of goods sold Gross margin Operating (nonmanufacturing) costs Operating income S.19.979) 10. Animal Gear is making a loss and will need to increase revenues and manage costs to turn around the business. Preparing a budget helps Animal Gear manage costs based on revenues and production needs. look for opportunities to increase efficiencies, reduce costs, particularly in areas where costs are high, coordinate and communicate across different parts of the organization, create a framework for judging performance and facilitating learning, and motivate management and employees to achieve "stretch" targets of higher revenues and lower costs