Alps Ltd manufactures & sells snowboards. The company manufactures a single model, the Slider. In the summer
Question:
Alps Ltd manufactures & sells snowboards. The company manufactures a single model, the Slider. In the summer of 2020, Alps Ltd.’s management accountant gathered the following data to prepare budget for 2021.
Material & labour requirements:
Direct Materials
Wood 1.25 board meters (b.m.) per snowboard
Fibreglass 4.8 metres per snowboard
Direct manufacturing labour 5 hours per snowboard
The company’s CEO expects to sell 1000 snowboards during 2021 at an estimated retail price of $700 per board. Further, the CEO expects 2021 beginning inventory of 100 snowboards and would like to end the 2021 with 200 snowboards in stock.
Direct material inventory:
Beginning inventory 1/1/21 Closing inventory 31/12/21
Wood 500 b.m. 375 b.m.
Fibreglass 800 metres 1600 metres
Variable manufacturing overhead is $14 per direct manufacturing labour hour. There are also $132 000 in fixed manufacturing overhead costs budgeted for 2021. The company combines both variable & fixed manufacturing overhead into a single rate based on direct manufacturing labour hours. Variable marketing costs are allocated at the rate of $250 per sales visit. The marketing plan calls for 30 sales visits during 2021. Finally, there are $30 000 in fixed non-manufacturing costs budgeted for 2021.
Other data include:
2020-unit price 2021-unit price
Wood $112.00 per b.m. $120.00 b m.
Fibreglass $6 per metre $6.25 per metre
Direct manufacturing labour $48 per hour $50 per hour
The inventoriable unit cost for ending finished goods inventory on 31 December 2020 is $580. 80. Assume Alps uses FIFO inventory method for both direct materials & finished goods. (Ignore work in process).
Budgeted balances as at December 31, 2021 are:
Cash $10 000
Property Plant & equipment (net) 850 000
Current liabilities 17 000
Non-Current liabilities 178 000
Share Holders’ equity 844 000
Required:
a) Prepare Sales budget for 2021
b) Prepare production budget for 2021
c) Prepare the direct material usage & purchase budget
d) Prepare direct manufacturing labour budget
