REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
16th Edition
ISBN: 9780134789705
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 6, Problem 6.44P
Comprehensive problem; ABC manufacturing, two products. Hazlett, Inc., operates at capacity and makes plastic combs and hairbrushes. Although the combs and brushes are a matching set, they are sold individually and so the sales mix is not 1:1. Hazlett’s management is planning its annual budget for fiscal year 2018. Here is information for 2018:
Input Prices
| Direct materials | |
| Plastic | $0.30 per ounce |
| Bristles | $0.75 per bunch |
| Direct manufacturing labor | $ 18 per direct manufacturing labor-hour |
Input Quantities per Unit of Output
| Combs | Brushes | |
| Direct materials | ||
| Plastic | 5 ounces | 8 ounces |
| Bristles | — | 16 bunches |
| Direct manufacturing labor | 0.05 hours | 0.2 hours |
| Machine-hours (MH) | 0.025 MH | 0.1 MH |
Inventory Information, Direct Materials
| Plastic | Bristles | |
| Beginning inventory | 1,600 ounces | 1,820 bunches |
| Target ending inventory | 1,766 ounces | 2,272 bunches |
| Cost of beginning inventory | $456 | $1,419 |
Hazlett accounts for direct materials using a FIFO cost flow.
Sales and Inventory Information, Finished Goods
| Combs | Brushes | |
| Expected sales in units | 12,000 | 14,000 |
| Selling price | $ 9 | $ 30 |
| Target ending inventory in units | 1,200 | 1,400 |
| Beginning inventory in units | 600 | 1,200 |
| Beginning inventory in dollars | $ 2,700 | $27,180 |
Hazlett uses a FIFO cost-flow assumption for finished-goods inventory.
Combs are manufactured in batches of 200, and brushes are manufactured in batches of 100. It takes 20 minutes to set up for a batch of combs and 1 hour to set up for a batch of brushes.
Hazlett uses activity-based costing and has classified all overhead costs as shown in the following table. Budgeted fixed overhead costs vary with capacity. Hazlett operates at capacity so budgeted fixed overhead cost per unit equals the budgeted fixed overhead costs divided by the budgeted quantities of the cost allocation base.
Delivery trucks transport units sold in delivery sizes of 1,000 combs or 1,000 brushes.
Do the following for the year 2018:
- 1. Prepare the revenues budget.
- 2. Use the revenues budget to:
- a. Find the budgeted allocation rate for marketing costs.
- b. Find the budgeted number of deliveries and allocation rate for distribution costs.
- 3. Prepare the production budget in units.
- 4. Use the production budget to:
- a. Find the budgeted number of setups and setup-hours and the allocation rate for setup costs.
- b. Find the budgeted total machine-hours and the allocation rate for
processing costs. - c. Find the budgeted total units produced and the allocation rate for inspection costs.
- 5. Prepare the direct material usage budget and the direct material purchases budget in both units and dollars; round to whole dollars.
- 6. Use the direct material usage budget to find the budgeted allocation rate for materials-handling costs.
- 7. Prepare the direct
manufacturing labor cost budget. - 8. Prepare the manufacturing overhead cost budget for materials handling, setup, processing, and inspection costs.
- 9. Prepare the budgeted unit cost of ending finished-goods inventory and ending inventories budget.
- 10. Prepare the cost of goods sold budget.
- 11. Prepare the nonmanufacturing overhead costs budget for marketing and distribution.
- 12. Prepare a
budgeted income statement (ignore income taxes). - 13. How does preparing the budget help Hazlett's management team better manage the company?
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Chapter 6 Solutions
REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
Ch. 6 - What are the four elements of the budgeting cycle?Ch. 6 - Define master budget.Ch. 6 - Strategy, plans, and budgets are unrelated to ore...Ch. 6 - Budgeted performance is a better criterion than...Ch. 6 - Production managers and marketing managers are...Ch. 6 - Budgets meet the cost-benefit test. They force...Ch. 6 - Define rolling budget. Give an example.Ch. 6 - Outline the steps in preparing an operating...Ch. 6 - The sales forecast is the cornerstone for...Ch. 6 - Prob. 6.10Q
Ch. 6 - Define Kaizen budgeting.Ch. 6 - Prob. 6.12QCh. 6 - Explain how the choice of the type of...Ch. 6 - What are some additional considerations that arise...Ch. 6 - Prob. 6.15QCh. 6 - Master budget. Which of the following statements...Ch. 6 - Operating and financial budgets. Which of the...Ch. 6 - Production budget. Superior Industries sales...Ch. 6 - Responsibility centers. Elmhurst Corporation is...Ch. 6 - Cash budget. Mary Jacobs, the controller of the...Ch. 6 - Sales budget, service setting. In 2017 Hart Sons,...Ch. 6 - Sales and production budget. The Coby Company...Ch. 6 - Direct material budget. Dawson Co. produces wine....Ch. 6 - Material purchases budget. The McGrath Company has...Ch. 6 - Revenues, production, and purchases budgets. The...Ch. 6 - Revenues and production budget. Saphire, Inc.,...Ch. 6 - Budgeting; direct material usage, manufacturing...Ch. 6 - Budgeting, service company. Ever Clean Company...Ch. 6 - Budgets for production and direct manufacturing...Ch. 6 - Activity-based budgeting. The Jerico store of...Ch. 6 - Kaizen approach to activity-based budgeting...Ch. 6 - Responsibility and controllability. Consider each...Ch. 6 - Responsibility, controllability, and stretch...Ch. 6 - Cash flow analysis, sensitivity analysis....Ch. 6 - Budget schedules for a manufacturer. Hale...Ch. 6 - Budgeted costs, Kaizen improvements environmental...Ch. 6 - Revenue and production budgets. (CPA, adapted) The...Ch. 6 - Budgeted income statement. (CMA, adapted) Smart...Ch. 6 - Prob. 6.39PCh. 6 - Comprehensive problem with ABC costing. Animal...Ch. 6 - Cash budget (continuation of 6-40). Refer to the...Ch. 6 - Comprehensive operating budget. Skulas, Inc.,...Ch. 6 - Cash budgeting, budgeted balance sheet....Ch. 6 - Comprehensive problem; ABC manufacturing, two...Ch. 6 - Cash budget. (Continuation of 6-44) (Appendix)...Ch. 6 - Budgeting and ethics. Jayzee Company manufactures...Ch. 6 - Kaizen budgeting for carbon emissions. Apex...Ch. 6 - Comprehensive budgeting problem; activity-based...
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