Concept explainers
Budget schedules for a manufacturer. Hale Specialties manufactures, among other things, woolen blankets for the athletic teams of the two local high schools. The company sews the blankets from fabric and sews on a logo patch purchased from the licensed logo store site. The teams are as follows:
- Broncos, with red blankets and the Broncos logo
- Rams, with black blankets and the Rams logo
Also, the black blankets are slightly larger than the red blankets.
The budgeted direct-cost inputs for each product in 2017 are as follows:
Broncos Blanket | Rams Blanket | |
Red wool fabric | 5 yards | 0 yards |
Black wool fabric | 0 | 6 |
Broncos logo patches | 1 | 0 |
Rams logo patches | 0 | 1 |
Direct manufacturing labor | 4 hours | 5 hours |
Unit data pertaining to the direct materials for March 2017 are as follows:
Actual Beginning Direct Materials Inventory (3/1/2017)
Broncos Blanket | Rams Blanket | |
Red wool fabric | 40 yards | 0 yards |
Black wool fabric | 0 | 20 |
Broncos logo patches | 50 | 0 |
Rams logo patches | 0 | 65 |
Target Ending Direct Materials Inventory (3/31/2017)
Broncos Blanket | Rams Blanket | |
Red wool fabric | 30 yards | 0 yards |
Black wool fabric | 0 | 20 |
Broncos logo patches | 30 | 0 |
Rams logo patches | 0 | 30 |
Unit cost data for direct-cost inputs pertaining to February 2017 and March 2017 are as follows:
February 2017 (actual) | March 2017 (budgeted) | |
Red wool fabric (per yard) | $10 | $11 |
Black wool fabric (per yard) | 14 | 13 |
Broncos logo patches (per patch) | 8 | 8 |
Rams logo patches (per patch) | 7 | 9 |
27 | 28 |
Manufacturing overhead (both variable and fixed) is allocated to each blanket on the basis of budgeted direct manufacturing labor-hours per blanket. The budgeted variable manufacturing overhead rate for March 2017 is $17 per direct manufacturing labor-hour. The budgeted fixed manufacturing overhead for March 2017 is $14,625. Both variable and fixed manufacturing overhead costs are allocated to each unit of finished goods Data relating to finished-goods inventory for March 2017 are as follows:
Broncos Blankets | Rams Blankets | |
Beginning inventory in units | 14 | 19 |
Beginning inventory in dollars (cost) | $1,960 | $2,945 |
Target ending inventory in units | 24 | 29 |
Budgeted sales for March 2017 are 140 units of the Broncos blankets and 195 units of the Rams blankets. The budgeted selling prices per unit in March 2017 are $305 for the Broncos blankets and $378 for the Rams blankets. Assume the following in your answer:
- Work-in-process inventories are negligible and ignored.
- Direct materials inventory and finished-goods inventory are costed using the FIFO method.
- Unit costs of direct materials purchased and finished goods are constant in March 2017.
- 1. Prepare the following budgets for March 2017:
Required
- a. Revenues budget
- b. Production budget in units
- c. Direct material usage budget and direct materials purchases budget
- d. Direct manufacturing labor costs budget
- e. Manufacturing overhead costs budget
- f. Ending inventories budget (direct materials and finished goods)
- g. Cost of goods sold budget
- 2. Suppose Hale Specialties decides to incorporate continuous improvement into its budgeting process. Describe two areas where it could incorporate continuous improvement into the budget schedules in requirement 1.
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