Comprehensive operating budget. Skulas, Inc., manufactures and sells snowboards. Skulas manufactures a single model, the Pipex. In late 2017, Skulas’s management accountant gathered the following data to prepare budgets for January 2018: Materials and Labor Requirement Direct Materials Wood 9 Boards Feet (b.f.) per snowboard Fiberglass 10 Yards per snowboard Direct manufacturing labor 5 hours per snowboard Skulas’s CEO expects to sell 2,900 snowboards during January 2018 at an estimated retail price of $650 per board. Further, the CEO expects 2018 beginning inventory of 500 snowboards and would like to end January 2018 with 200 snowboards in stock. Direct Materials Inventories Begining Inventory 1/1/2018 Ending Inventory 1/31/2018 Wood 2,040 b.f. 1,540 b.f. Fiberglass 1,040 yards 2,040 yards Alternative Text Variable manufacturing overhead is $7 per direct manufacturing labor-hour. There are also $81,000 in fixed manufacturing overhead costs budgeted for January 2018. Skulas combines both variable and fixed manufacturing overhead into a single rate based on direct manufacturing labor-hours. Variable marketing costs are allocated at the rate of $250 per sales visit. The marketing plan calls for 38 sales visits during January 2018. Finally, there are $35,000 in fixed nonmanufacturing costs budgeted for January 2018. Other data include: 2017 Unit Price 2018 Unit Price Wood $32.00 per b.f. $34.00 per b.f. Fiberglass $8.00 per yard $9.00 per yar Direct manu. labor $28.00 per hour $29.00 per hour The inventoriable unit cost for ending finished-goods inventory on December 31, 2017, is $374.80. Assume Skulas uses a FIFO inventory method for both direct materials and finished goods. Ignore work in process in your calculations. Prepare a direct manufacturing labor costs budget for January 2018. Prepare a manufacturing overhead costs budget for January 2018. What is the budgeted manufacturing overhead rate for January 2018? What is the budgeted manufacturing overhead cost per output unit in January 2018?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Comprehensive operating budget. Skulas, Inc., manufactures and sells snowboards. Skulas manufactures a single model, the Pipex. In late 2017, Skulas’s
Materials and Labor Requirement
Direct Materials
Wood 9 Boards Feet (b.f.) per snowboard
Fiberglass 10 Yards per snowboard
Direct manufacturing labor 5 hours per snowboard
Skulas’s CEO expects to sell 2,900 snowboards during January 2018 at an estimated retail price of $650 per board. Further, the CEO expects 2018 beginning inventory of 500 snowboards and would like to end January 2018 with 200 snowboards in stock.
Direct Materials Inventories
Begining Inventory 1/1/2018 Ending Inventory 1/31/2018
Wood 2,040 b.f. 1,540 b.f.
Fiberglass 1,040 yards 2,040 yards
Alternative Text Variable manufacturing overhead is $7 per direct manufacturing labor-hour. There are also $81,000 in fixed manufacturing overhead costs budgeted for January 2018. Skulas combines both variable and fixed manufacturing overhead into a single rate based on direct manufacturing labor-hours. Variable marketing costs are allocated at the rate of $250 per sales visit. The marketing plan calls for 38 sales visits during January 2018. Finally, there are $35,000 in fixed nonmanufacturing costs budgeted for January 2018.
Other data include:
2017 Unit Price 2018 Unit Price
Wood $32.00 per b.f. $34.00 per b.f.
Fiberglass $8.00 per yard $9.00 per yar
Direct manu. labor $28.00 per hour $29.00 per hour
The inventoriable unit cost for ending finished-goods inventory on December 31, 2017, is $374.80. Assume Skulas uses a FIFO inventory method for both direct materials and finished goods. Ignore work in process in your calculations.
- Prepare a direct
manufacturing labor costs budget for January 2018. - Prepare a manufacturing overhead costs budget for January 2018.
- What is the budgeted manufacturing overhead rate for January 2018?
- What is the budgeted manufacturing overhead cost per output unit in January 2018?
- Calculate the cost of a snowboard manufactured in January 2018.
- Prepare an ending inventory budget for both direct materials and finished goods for January 2018.
- Prepare a cost of goods sold budget for January 2018.
- Prepare the
budgeted income statement for Skulas, Inc., for January 2018. - What questions might the CEO ask the management team when reviewing the budget? Should the CEO set stretch targets? Explain briefly.
- How does preparing the budget help Skulas’s management team better manage the company?
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