Question

ašes Current Designs Excel CD9 Diane Buswell is preparing the 2020 budget for one of Current Designs' rotomolded kayaks. Extensive meetings with members of the sales department and executive team have resulted in the fol- lowing unit sales projections for 2020 1,000 kayaks 1,500 kayaks 750 kayaks 750 kayaks Quarter Quarter 2 Quarter 3 Quarter 4 Current Designs' policy is to have finished goods ending inventory in a quarter equal to 20 % of the next quarter's anticipated sales. Preliminary sales projections for 2021 are 1,100 units for the first quarter and 1,500 units for the second quarter. Ending inventory of finished goods at December 31, 2019, will be 200 rotomolded kayaks. Froduction of each kayak requires 54 pounds of polyethylene powder and a finishing kit (rope, seat, neardware, etc.). Company policy is that the ending inventory of polyethylene powder should be 25% of the amount needed for production in the next quarter. Assume that the ending inventory of polyethylene powder on December 31, 2019, is 19,400 pounds. The finishing kits can be assembled as they are needed. As a result, Current Designs does not maintain a significant inventory of the finishing kits. The polyethylene powder used in these kayaks costs $1.50 per pound, and the finishing kits cost $170 each. Production of a single kayak requires 2 hours of time by more experienced, type I employees and 3 hours of finishing time by type II employees. The type I employees are paid $15 per hour, and the type II employees are paid $12 per hour. Selling and administrative expenses for this line are expected to be $45 per unit sold plus $7,500 per quarter. Manufacturing overhead is assigned at 150% of labor costs. Instructions Prepare the production budget, direct materials budget, direct labor budget, manufacturing overhead budget, and selling and administrative budget for this product line by quarter and in total for 2020.

Answer 1

Total PRODUCTION BUDGET Quarter 1 Quarter 2 1500 750 300 150 1000 1500 13001 1650 200 300 1100 13501 Projected Sales of Next Quarter Ending Inventory Sales of current Quarter Finished goods required Less: Opening Inventory Units to be produced Quarter 3 750 150 750 900 150 750 Quarter 4 11001 220 750 9701 150 8200 4000 Quarter 1 1500 300 1100 1400 220 1180 4020 Total Production units of next Quarter Ending Inventory of material for finished units Ending Inventory of material Current Production of units Current production requirement of material Total requirement of material Less: Opening Inventory Units to be purchased Cost of material per pound Total cost of polyethylene DIRECT MATERIAL BUDGET Quarter 1 Quarter 2 Quarter 3 Quarter 4 1350 750 820 1180 337.51 187.5 205 295 18225 10125 110701 159301 11001 1350 750 820 59400 72900 40500 44280 77625 83025 51570 602101 19400 18225 10125 11070 582251 64800 414451 49140 1.5 1.5 1.5 1.5 87337.5| 972001 62167.5 73710 213610 1.5 3 20415 Units to be produced Cost of Finishing Kits Total cost of Finishing Kits 11001 170 187000 13501 170 229500 7501 170 127500 820 1701 139400 4020 170 83400 6 Total Material Cost 274337.5 3267001 189667.5 213110 1 003815

DIRECT LABOR BUDGET Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total 1100 13507508204020 Units to be produced Cost per unit Time required by Type I employee Cost per labor Hour of Type I employee Time required by Type Il employee Cost per labor Hour of Type II employee Total Labor cost per unit Direct Labor Cost $ 15.00 $ 15.00 $ 15.00 $ 15.00 33 $ 12.00 $ 12.00 $ 12.00 $ 12.00 $ 66.00 $ 66.00$ 66.00 $ 66.00 $ 66.00 $ 72,600.00 $ 89,100.00 $ 49,500.00 $ 54,120.00 $ 2,65,320.00 MANUFACTURING OVERHEAD BUDGET Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Direct Labour Cost $ 72,600.00 $ 89,100.00 $ 49,500.00 $ 54,120.00 $ 2,65,320.00 Manufacturing Overheads @ 150% of Direct Labor Cost $ 1,08,900.00 $ 1,33,650.00 $ 74,250.00 $ 81,180.00 $3,97,980.00 SELLING & ADMINISTRATIVE BUDGET Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Variable Units Sold $ 1,000.00 $ 1,500.00 $ 750.00 $ 750.00$ 4,000.00 Selling & Administrative Expense Per Unit $ 45.00 $ 45.00 $ 45.00 $ 45.00 $ 45.00 $ 45,000.00 $ 67,500.00 $ 33,750.00 $ 33,750.00 $ 1,80,000.00 Fixed $ 7,500.00 $ 7,500.00 $ 7,500.00 $ 7,500.00 $ 30,000.00 Selling & Administrative Cost line Administrative Cast I $ 52,500.00 $ 75,000.00 $ 41,250.00 $ 41,250.00 $ 2,10,000.00