Question

ACNT-2309: Master Budgeting - Class Project: • Premium Furniture sells two models of granite-top coffee tables: Casual and Deluxe. Assume that FIFO is used for costing inventory There are two types of direct materials: red oak (RO) and granite slabs (GS). Direct material costs are variable with respect to units of output-coffee tables. Direct manufacturing labor workers are hired on an hourly basis; no overtime is worked There are two cost drivers for manufacturing overhead costs-direct manufacturing labor-hours and setup labor-hours. Direct manufacturing labor-hours is the cost driver for the variable portion of manufacturing operations overhead. The fixed component of manufacturing operations overhead is tied to the manufacturing capacity of 300,000 direct manufacturing labor-hours that Premium Furniture has planned for 2012 Setup labor-hours is the cost driver for the variable portion of machine setup overhead. The fixed component of machine setup overhead is tied to the setup capacity of 15,000 setup labor-hours that Premium Furniture has planned for 2012. For computing inventoriable costs, Premium Furniture allocates all (variable and fixed) manufacturing operations overhead costs using direct manufacturing labor-hours and machine setup overhead costs using setup labor-hours. • Relevant Production and Sales Data are given below: Nonmanufacturing costs consist of product design, marketing, and distribution costs. All product design costs are fixed costs for 2012. The variable component of market ing costs equals the 6.5% sales commission on revenues paid to salespeople. The vari- able portion of distribution costs varies with cubic feet of tables moved. The following data are available for the 2012 budget: Direct materials Red Oak Granite Direct manufacturing labor $ 7 per board footb.) same as in 2011) $10 per square foot sq. ft) same as in 2011) $20 per hour

Answer 1

Answer-1:

PREMIUM FURNITURE Revenue Budget For the year ending 2012 Casual Granite Table Deluxe Granite Table Sales (in units) 50,000 10,000 Sales value @600 per sales unit 30,000,000 Sales value @800 per sales unit 8,000,000

Answer-2:

PREMIUM FURNITURE Production Budget For the year ending 2012 Casual Granite Table Deluxe Granite Table Sales (in units) 50,000 10,000 Add: Ending finished goods inventory 11,000 500 Total 61,000 10,500 Less: Opening finished goods inventory 1,000 500 Budgeted production (in units) 60,000 10,000

Answer-3:

PREMIUM FURNITURE Direct Material Usage Budget For the year ending 2012 Red Oak Unit required for Casual Granite Table: (60,000 units x 12 board feet) 720,000 (60,000 units x 6 square feet) Granite 360,000 120,000 Unit required for Deluxe Granite Table: (10,000 units x 12 board feet) |(10,000 units x 8 square feet) Total direct material usage 80,000 440,000 840,000

Answer-4:

PREMIUM FURNITURE Direct Material Purchase Budget For the year ending 2012 Red Oak Total direct material usage 840000 Add: Ending raw material 80000 Total 920000 Less: Opening raw material inventory 70000 Direct material purchase units 850000 Direct material purchase cost 5,950,000 Granite 440000 20000 460000 60000 400000 4,000,000 $