Current Designs 9 (Part Level Submission) 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 following unit sales projections for 2020. Quarter 1 1,000 kayaks Quarter 2 1,300 kayaks Quarter 3 850 kayaks Quarter 4 850 kayaks Current Designs' policy is to have finished goods ending inventory in a quarter equal to 15% of the next quarter's anticipated sales. Preliminary sales projections for 2021 are 1,100 units for the first quarter and 1,300 units for the second quarter. Ending inventory of finished goods at December 31, 2019, will be 150 rotomolded kayaks. Production of each kayak requires 40 pounds of polyethylene powder and a finishing kit (rope, seat, hardware, etc.). Company policy is that the ending inventory of polyethylene powder should be 20% of the amount needed for production in the next quarter. Assume that the ending inventory of polyethylene powder on December 31, 2019, is 19,000 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 $1.00 per pound, and the finishing kits cost $140 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 $12 per hour, and the type II employees are paid $9 per hour. Selling and administrative expenses for this line are expected to be $40 per unit sold plus $6,000 per quarter. Manufacturing overhead is assigned at 140% of labor costs.
Current Designs 9 (Part Level Submission) 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 following unit sales projections for 2020. Quarter 1 1,000 kayaks Quarter 2 1,300 kayaks Quarter 3 850 kayaks Quarter 4 850 kayaks Current Designs' policy is to have finished goods ending inventory in a quarter equal to 15% of the next quarter's anticipated sales. Preliminary sales projections for 2021 are 1,100 units for the first quarter and 1,300 units for the second quarter. Ending inventory of finished goods at December 31, 2019, will be 150 rotomolded kayaks. Production of each kayak requires 40 pounds of polyethylene powder and a finishing kit (rope, seat, hardware, etc.). Company policy is that the ending inventory of polyethylene powder should be 20% of the amount needed for production in the next quarter. Assume that the ending inventory of polyethylene powder on December 31, 2019, is 19,000 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 $1.00 per pound, and the finishing kits cost $140 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 $12 per hour, and the type II employees are paid $9 per hour. Selling and administrative expenses for this line are expected to be $40 per unit sold plus $6,000 per quarter. Manufacturing overhead is assigned at 140% of labor costs.
Chapter8: Budgets And Bank Reconciliations
Section: Chapter Questions
Problem 2.3C
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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.
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Transcribed Image Text:Direct Materials Budget-Polyethylene Powder
For the Year Ending December 31, 2020
Quarter
Q1
Q2
Q3
Q4
Total
Units to be Produced
1,045
1,233
850
887
Pounds of Polyethylene Powder Per Unit
40
40
40
40
Total Pounds Needed for Production
41,800
49,320
34,000
35,480
Add +
Desired Ending Inventory of Powder
7,398
5,100
35,480
9,040
Total Pounds of Powder Required
49,198
54,420
69,480
44,520
Less
Beginning Inventory of Powder
Pounds of Polyethylene Powder to be Purchased
Cost Per Pound
$
Cost of Polyethylene Powder to be Purchased
$
Cost of Required Finishing Kits
Total Costs for Direct Materials
$
%24
%24
%24
%24
%24
Transcribed Image Text:Current Designs 9 (Part Level Submission)
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
following unit sales projections for 2020.
Quarter 1
1,000 kayaks
Quarter 2
1,300 kayaks
Quarter 3
850 kayaks
Quarter 4
850 kayaks
Current Designs' policy is to have finished goods ending inventory in a quarter equal to 15% of the next quarter's anticipated sales. Preliminary sales projections for 2021 are 1,100 units for the first
quarter and 1,300 units for the second quarter. Ending inventory of finished goods at December 31, 2019, will be 150 rotomolded kayaks.
Production of each kayak requires 40 pounds of polyethylene powder and a finishing kit (rope, seat, hardware, etc.). Company policy is that the ending inventory
20% of the amount needed for production in the next quarter. Assume that the ending inventory of polyethylene powder on December 31, 2019, is 19,000 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.
polyethylene powder should be
The polyethylene powder used in these kayaks costs $1.00 per pound, and the finishing kits cost $140 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 $12 per hour, and the type II employees are paid $9 per hour.
Selling and administrative expenses for this line are expected to be $40 per unit sold plus $6,000 per quarter. Manufacturing overhead is assigned at 140% of labor costs.
(a)
Your answer is correct.
Prepare the production budget for this product line by quarter and in total for 2020.
CURRENT DESIGNS
Production Budget
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