Adam Inc. produces three different types of chairs: an outdoor chair, an office chair, and a kitchen chair. The outdoor chairs are made entirely of plastic. The office chairs have a plastic base and are covered in leather. The kitchen chairs are made out of wood with a leather seat. As the controller, you are expected to prepare Adams's operating budget for April of 2021. Here is Adams's balance sheet as of 3/31/2021:

Cash $ 21,800

Accounts Receivable 9,000

DM Inventory 526,745

FG Inventory 1,038,550

Land 8,000

Buildings and Equipment 70,000

Accumulated Depreciation (29,200)

Total Assets $ 1,644,895

Accounts Payable $ 2,580

Capital Stock 17,500

Retained Earnings 1,624,815

Total Liabilities and

Stockholders Equity $ 1,644,895

You have gathered the following information about expected activity in 2021:

	Outdoor Chairs	Office Chairs	Kitchen Chairs
April 2021	2,200	1,800	3,900
May 2021	2600	2500	3600
June 2021	3,700	2400	2,800

The Outdoor Chairs are expected to sell for $250 each, the Office Chairs are expected to sell for $600 each, and the Kitchen Chairs are expected

to sell for $775 each.

2. For each product, Adams plans to have ending finished goods inventory (in units) for each month that equals 25% of the next month's sales (in units). Finished Goods inventory on 3/31/2021 consists of 810 Outdoor Chairs at a cost of $180 per unit, 865 Office Chairs at a cost of $550 per unit, and 600 Kitchen Chairs at a cost of $695 per unit. Adams uses FIFO to account for its finished goods inventory.

3. Adams uses plastic, leather, and wood to make its chairs. Each Outdoor Chair requires 25 pounds of plastic. Each Office Chair requires 15 pounds of plastic and 21 square feet of leather. Each Kitchen Chair requires 9 square feet of leather and 42 board feet of wood. The company expects to pay $2.25 per pound of plastic, $14.95 per square foot of leather, and $8.00 per board foot of wood.

4. Direct Materials (DM) inventory on 3/31/2021 consists of 14,800 pounds of plastic at a cost of $1.75 per pound, 17,300 square feet of leather at a cost of $15.00 per square foot, and 37,130 board feet of wood at a cost of $6.50 per board foot. The target ending DM inventory (in units) for each material is budgeted to be 15% of the amount of material required to be used in production that month (e.g., the total pounds of plastic required to be used in production in a given month x 15% = the target ending inventory for plastic in that month). Adams uses FIFO to account for its DM inventory.

5. Each Outdoor Chair requires 3 hours of direct labor, each Office Chair requires 6 hours of direct labor, and each Kitchen Chair requires 8 hours of direct labor. The direct labor rate is expected to be $14 per hour.

6. Adams uses activity-based costing, and has four cost pools for its indirect manufacturing costs. The cost pool data is as follows:

Cost Pool	Cost Driver	Rate
Set up	Set up hours	455.00 per setup-hour
Machining	Machine hour	12.00 per machine hour
Assembly	Direct labor hours	8.00 per direct labor hour
Packaging	Number of chairs	5.00 per chair

All of the products are made in batches of 60 units. Each batch of Outdoor Chairs requires 1.5 setup hours. Each batch of Office Chairs requires 3 setup hours. Each batch of Kitchen Chairs requires 2 setup hours. Each Outdoor Chair requires 4 machine hours, each Office Chair requires 6 machine hours, and each Kitchen Chair requires 7 machine hours.

7. Variable selling and administrative costs are $9.00 per unit sold. Fixed selling and administrative costs are $212,000 per month.

You are required to do the following:

Prepare a complete operating budget for Adams Inc. for the month of April 2021. This should include all of the following schedules:

- revenues budget

- production budget (in units)

- direct materials usage budget (in units and dollars)

- direct materials purchases budget (in units and dollars)

- direct labor cost budget

- manufacturing overhead cost budget

- budget of the ending finished goods inventory unit cost

- ending inventories budget

- cost of goods sold budget

- nonmanufacturing costs budget

- budgeted income statement for the month

Answer rating: 100% (QA)

For Jan Outdoor chair Office chair Kitchen chair Total Sales units 2700 4700 4400 11800 Price per unit 220 600 755 Revenue 594000 2820000 3322000 6736000 Production Outdoor chair Office chair Kitchen ... View the full answer