Warsaw Ltd operates at capacity and makes glass-topped dining tables and wooden chairs, which are then...

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Warsaw Ltd operates at capacity and makes glass-topped dining tables and wooden chairs, which are then typically sold as sets of four chairs with one table. However, some customers purchase replacement or extra chairs, and others buy some chairs or a table only, so the sales mix is not exactly 4:1. Warsaw Ltd is planning its annual budget for the financial year 2020. Information for 2020 is as follows: Direct materials Wood Glass Direct manufacturing labour Direct materials Wood Glass Direct manufacturing labour Machine-hours (MH) Input prices $5.30 per board metre $11.5 per sheet $14 per direct manufacturing labour- hour Input quantities per unit of output Chairs 1.2 board metres 3 hours 2 MH 3 Tables 1.7 board metres 2 sheets 6 hours 5 MH Beginning inventory Target ending inventory Expected sales in units Selling price Target ending inventory in units Beginning inventory in units Sales and inventory information, finished goods Cost type Manufacturing: Materials handling Set-up Processing Non- 27 200 board metres 29 360 board metres manufacturing: Marketing Distribution Wood Budgeted variable $342 840 97.000 789 250 2011 200 54 000 Chairs 172 000 $70 8 400 7 500 Chairs are manufactured in batches of 500 and tables are manufactured in batches of 50. It takes three hours to set up for a batch of chairs and two hours to set up for a batch of tables. Warsaw Ltd uses activity-based costing and has classified all overhead costs as shown in the table below: Budgeted fixed $600 000 300 740 5 900 000 Glass 4 500 000 380 000 8 700 sheets 9 500 sheets Tables 45 000 $900 2 050 2 150 Cost driver/allocation base Number of board metres used Set-up hours Machine-hours Sales revenue Number of deliveries 5. Prepare the direct materials usage budget and the direct materials purchases budget. (5 marks) Warsaw Ltd operates at capacity and makes glass-topped dining tables and wooden chairs, which are then typically sold as sets of four chairs with one table. However, some customers purchase replacement or extra chairs, and others buy some chairs or a table only, so the sales mix is not exactly 4:1. Warsaw Ltd is planning its annual budget for the financial year 2020. Information for 2020 is as follows: Direct materials Wood Glass Direct manufacturing labour Direct materials Wood Glass Direct manufacturing labour Machine-hours (MH) Input prices $5.30 per board metre $11.5 per sheet $14 per direct manufacturing labour- hour Input quantities per unit of output Chairs 1.2 board metres 3 hours 2 MH 3 Tables 1.7 board metres 2 sheets 6 hours 5 MH Beginning inventory Target ending inventory Expected sales in units Selling price Target ending inventory in units Beginning inventory in units Sales and inventory information, finished goods Cost type Manufacturing: Materials handling Set-up Processing Non- 27 200 board metres 29 360 board metres manufacturing: Marketing Distribution Wood Budgeted variable $342 840 97.000 789 250 2011 200 54 000 Chairs 172 000 $70 8 400 7 500 Chairs are manufactured in batches of 500 and tables are manufactured in batches of 50. It takes three hours to set up for a batch of chairs and two hours to set up for a batch of tables. Warsaw Ltd uses activity-based costing and has classified all overhead costs as shown in the table below: Budgeted fixed $600 000 300 740 5 900 000 Glass 4 500 000 380 000 8 700 sheets 9 500 sheets Tables 45 000 $900 2 050 2 150 Cost driver/allocation base Number of board metres used Set-up hours Machine-hours Sales revenue Number of deliveries 5. Prepare the direct materials usage budget and the direct materials purchases budget. (5 marks)

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