Question

Current Designs CD9 Diane Buswell is preparing the 2020 budget for one of Current Designs' rotomolded Extensive meetings with members of the sales department and executive team have resulted in the lowing unit sales projections for 2020. Quarter 1 1,000 kayaks Quarter 2 1,500 kayaks Quarter 3 750 kayaks Quarter 4 750 kayaks 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. Production of each kayak requires 54 pounds of polyethylene powder and a finishing kit (rope, seal. hardware, 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 14,850 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 cos $170 each. Production of a single kayak requires 2 hours of time by more experienced, type I employce and 3 hours of finishing time by type II employees. The type I employees are paid $15 per hour, and type II employees are paid $12 per hour. Selling and administrative expenses for this line are expected to be $45 per unit sold plus sur quarter. Manufacturing overhead is assigned at 150% of labor costs. Instructions Prepare the production budget, direct materials budget, direct labor budget, manufactur budget, and selling and administrative budget for this product line by quarter and in total - manufacturing overhead

Answer 1

1		Production Budget
		Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total	Quarter 1
	Unit Sales	1,000	1,500	750	750	4,000	1,100
	Plus: Desired ending inventory	300	150	150	220	220	300
	Less: Beginning Inventory	200	300	150	150	200	220
	Units to produce	1,100	1,350	750	820	4,020	1,180

2		Direct Materials Budget
		Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total	Quarter 1
	Polythene
	Units to be produced	1,100	1,350	750	820	4,020	1,180
	Multiply by: Quantity of DM needed per unit	54	54	54	54	54	54
	Total Quantity of DM needed	59,400	72,900	40,500	44,280	217,080	63,720
	Plus: Desired Ending inventory of DM	18,225	10,125	11,070	15,930	15,930
	Less: Beginning inventory of DM	14,850	18,225	10,125	11,070	14,850
	Total Quantity of DM to purchase	62,775	64,800	41,445	49,140	218,160
	Multiply by: Cost per unit	1.50	1.50	1.50	1.50	1.50
	Total cost of DM Purchases	94,163	97,200	62,168	73,710	327,240
	Finishing Kit
	Total Quantity of DM needed	1,100	1,350	750	820	4,020
	Multiply by: Cost per unit	170.00	170.00	170.00	170.00	170.00
	Total cost of DM Purchases	187,000	229,500	127,500	139,400	683,400

3		Direct Labour Budget
		Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total
	Type I
	Units to be produced	1,100	1,350	750	820	4,020
	Multiply by: DL hours per unit	2	2	2	2	2
	Total DL hours	2,200	2,700	1,500	1,640	8,040
	Multiply by: DL Rate	15	15	15	15	15
	Total Direct Labour budget	33,000	40,500	22,500	24,600	120,600
	Type II
	Units to be produced	1,100	1,350	750	820	4,020
	Multiply by: DL hours per unit	3	3	3	3	3
	Total DL hours	3,300	4,050	2,250	2,460	12,060
	Multiply by: DL Rate	12	12	12	12	12
	Total Direct Labour budget	39,600	48,600	27,000	29,520	144,720
	Total Type I + II	72,600	89,100	49,500	54,120	265,320
4		Manufacturing Overhead Budget
		Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total
	150% of Labour Cost	108,900	133,650	74,250	81,180	397,980
5		Selling and Admin Expense Budget
		Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total
	Budgeted Sales in units	1,000	1,500	750	750	4,000
	Cost/ unit sold	45	45	45	45	45
	Sub Total	45,000	67,500	33,750	33,750	180,000
	Fixed Expenses	7,500	7,500	7,500	7,500	30,000
	Toyal Selling and Admin Expenses	52,500	75,000	41,250	41,250	210,000