Direct-Cost Inputs Unit cost data for direct-cost inputs pertaining to February 2017 and March 2017 are as follows: February 2017 (actual) March 2017 (budgeted) $ 17 $ 18 28 27 15 15 Red wool fabric (per yard) Black wool fabric (per yard) Broncos logo patches (per patch) Rams logo patches (per patch) Manufacturing labor cost per hour 14 16 34 35 i Direct Materials - X Unit data pertaining to the direct materials for March 2017 are as follows: Actual Beginning Direct Materials Inventory (3/1/2017) Broncos Blanket Rams Blanket Red wool fabric 75 yards 0 yards 55 Black wool fabric 0 85 0 Broncos logo patches Rams logo patches 0 100 Target Ending Direct Materials Inventory (3/31/2017) Broncos Blanket Rams Blanket Red wool fabric 65 yards 0 yards Black wool fabric 0 65 65 0 Broncos logo patches Rams logo patches 0 65 Budgeted Direct-Cost Inputs The budgeted direct-cost inputs for each product in 2017 are as follows: Broncos Blanket Rams Blanket Red wool fabric 12 yards 0 yards Black wool fabric 0 13 1 0 Broncos logo patches Rams logo patches Direct manufacturing labor 0 1 11 hours 12 hours 3. Lalonde Specialties manufactures, among other things, woolen blankets for the athletic teams of the two local high schools. (Click the icon to view additional information.) 2 (Click the icon to view the budgeted direct-cost.) 3(Click the icon to view the direct materials.) (Click the icon to view the direct-cost inputs.) Manufacturing overhead (both variable and fixed) is allocated to each blanket on the basis of budgeted direct manufacturing labor-hours per blanket. 5(Click the icon to view the overhead information.) 6(Click the icon to view the finished goods inventory.) 7(Click the icon to view additional information.) Read the requirements Requirement 1. Prepare the following budgets. a. Prepare the revenues budget. Revenues Budget For the Month of March Units Selling Price Total revenues Broncos Blankets 210 $ 1,124 Rams Blankets 230 1,215 Total b. Prepare the production budget in units. Production Budget For the Month of March Broncos Rams Budgeted units sales 210 230 38 43 Add target ending finished goods inventory Total required units 28 33 Deduct beginning finished goods inventory Units of finished goods to be produced c. Prepare the direct material usage budget and direct material purchases budget. Begin with the physical units portion, then prepare the cost budget portion of the direct material usage budget. (For amounts with a zero balance, make sure to enter "0" in the appropriate cell.) Direct Material Usage Budget in Quantity and Dollars For the Month of March Material Broncos Rams Red wool Black wool logo patches logo patches Total Physical Units Budget Direct materials required for Broncos yds yds. yds. yds Rams Total quantity of direct material to be used yds. yds. Cost Budget Available from beginning direct materials inventory (under a FIFO cost-flow assumption) Broncos Rams To be purchased this period Broncos Rams Direct materials to be used this period Now prepare March's direct material purchases budget. Direct Materials Purchases Budget For the Month of March Materials Broncos Rams Red wool Black wool logo patches logo patches Total Physical Units Budget To be used in production yds. 65 yds. yds. 65 yds. yds 65 65 Add target ending inventory Total requirement yds. 75 yds. 55 yds. 85 Deduct beginning inventory 100 Purchases to be made yds. yds Cost Budget - Purchases d. Prepare the direct manufacturing labor costs budget. (Abbreviation used: DMLH = Direct manufacturing labor hours) Direct Manufacturing Labor Costs Budget For the Month of March DMLH Total Hourly Output units produced per unit DMLH wage rate Total Broncos blankets 11.0 Rams blankets 12.0 Total e. Prepare the manufacturing overhead costs budget. Start by selecing the formula, and calculating the budgeted variable manufacturing overhead costs for March. Variable manufacturing X (2) overhead costs Now prepare the total manufacturing overhead cost budgets by entering the appropriate amounts then calculate the total manufacturing overhead costs. Manufacturing Overhead Budget For the Month of March Variable manufacturing overhead costs Fixed manufacturing overhead costs Total manufacturing overhead costs f. Prepare the ending inventories budget direct materials and finished goods). Complete the information below by entering the appropriate amounts to calculate the unit costs of ending finished goods inventory for the Broncos blankets and Rams blankets. Remember the fixed manufacturing overhead rate is the total fixed manufacturing overhead divided by the total direct manufacturing labor hours. Unit Costs of Ending Finished Goods Inventory March 31, 2017 Product Broncos Rams Cost per unit Input per unit Cost per unit Input per unit of input of output Total of input of output Total Wool $ 18 12 yds. 27 13 yds. 15 1 16 1 35 11 hrs. 35 12 hrs. Logo Direct manufacturing labor Fixed manufacturing overhead Variable manufacturing overhead 11 hrs. 12 hrs. 24 11 hrs. 24 12 hrs. Total Now prepare the ending inventories budget. Ending Inventories Budget March 31, 2017 Quantity Cost per unit Total Direct materials Red wool 65 $ 18 Black wool 65 27 Broncos logo 65 15 Rams logo 65 16 Finished goods Broncos blankets 38 Rams blankets 43 Total ending inventory g. Prepare the cost of goods sold budget. Cost of Goods Sold Budget For the Month of March, 2017 Beginning finished goods inventory, March 1 Direct materials used Direct manufacturing labor Manufacturing overhead Cost of goods manufactured Cost of goods available for sale Deduct ending finished goods inventory, March 31 Cost of goods sold Requirement 2. Suppose Lalonde Specialties decides to incorporate continuous improvement into its budgeting process. Select two areas where it could incorporate continuous improvement into the budget schedules in requirement 1. Lalonde Specialties can continually improve variable manufacturing overhead by budgeting more efficient use of the allocation base. Direct manufacturing labor can incorporate continuous improvement by revising the budgeted usage of 11 hours and 12 hours on a monthly basis, Only by reducing the budget on a monthly basis for the amounts of fixed overhead can Lalonde Specialties continually improve fixed manufacturing overhead. To continually improve the direct material usage budget, the company should verify that the beginning inventory is as low as possible to decrease the materials used during production By increasing the target ending finished goods inventory, Lalonde Specialties will reduce the production budget therefore continually improve the direct material purchases budget 1: Additional Blanket Information The company sews the blankets from fabric and sews on a logo patch purchased from the licensed logo store site. The teams are as follows: Broncos, with red blankets and the Broncos logo Rams, with black blankets and the Rams logo Also, the black blankets are slightly larger than the red blankets. 2: Budgeted Direct-Cost Inputs The budgeted direct-cost inputs for each product in 2017 are as follows: Broncos Blanket Rams Blanket Red wool fabric 12 yards O yards Black wool fabric 0 13 1 0 Broncos logo patches Rams logo patches Direct manufacturing labor 0 1 11 hours 12 hours 3: Direct Materials Unit data pertaining to the direct materials for March 2017 are as follows: Actual Beginning Direct Materials Inventory (3/1/2017) Broncos Blanket Rams Blanket Red wool fabric 0 yards 75 yards 0 Black wool fabric 55 85 0 Broncos logo patches Rams logo patches 0 100 Target Ending Direct Materials Inventory (3/31/2017) Broncos Blanket Rams Blanket Red wool fabric 65 yards O yards Black wool fabric 0 65 Broncos logo patches 65 0 Rams logo patches 0 65 4: Direct-Cost Inputs Unit cost data for direct-cost inputs pertaining to February 2017 and March 2017 are as follows: February 2017 (actual) March 2017 (budgeted) Red wool fabric (per yard) $ 17 S 18 Black wool fabric (per yard) 28 27 Broncos logo patches (per patch) 15 15 Rams logo patches (per patch) 14 16 Manufacturing labor cost per hour 34 35 5: Manufacturing Overhead Information The budgeted variable manufacturing overhead rate for March 2017 is $24 per direct manufacturing labor-hour. The budgeted fixed manufacturing overhead for March 2017 is $47,700. Both variable and fixed manufacturing overhead costs are allocated to each unit of finished goods. Rams Blanket 6: Finished Goods Inventory Data relating to finished goods inventory for March 2017 are as follows: Broncos Blanket Beginning inventory in units 28 Beginning inventory in dollars (cost) $ 5,880 Target ending inventory in units 38 33 $ 5,346 43 7: Sales and Other Information Budgeted sales for March 2017 are 210 units of the Broncos blankets and 230 units of the Rams blankets. The budgeted selling prices per unit in March 2017 are $1,124 for the Broncos blankets and $1,215 for the Rams blankets. Assume the following in your answer: Work-in-process inventories are negligible and ignored. Direct materials inventory and finished goods inventory are costed using the FIFO method. Unit costs of direct materials purchased and finished goods are constant in March 2017 a. C. 8: Requirements 1. Prepare the following budgets for March 2017: Revenues budget b. Production budget in units Direct material usage budget and direct material purchases budget d. Direct manufacturing labor costs budget e. Manufacturing overhead costs budget f. Ending inventories budget (direct materials and finished goods) g Cost of goods sold budget 2. Suppose Lalonde Specialties decides to incorporate continuous improvement into its budgeting process. Describe two areas where it could incorporate continuous improvement into the budget schedules in requirement 1. (1) O O Beginning inventory O Blankets hours Ending inventory O Materials O Total direct manufacturing labor hours O Variable overhead rate (2) O O Materials O Beginning inventory Total direct manufacturing labor hours Blankets hours Variable overhead rate O Ending inventory