Question

In: Accounting

Bonzo’s Boards makes reasonably high-end skateboards which sell for $400 each. The production process is fairly simple...

Bonzo’s Boards makes reasonably high-end skateboards which sell for $400 each. The production process is fairly simple and involves assembling components purchased from various suppliers. Since each skateboard only takes one hour to assemble, there is essentially no work-in-process inventory.

Bonzo’s Boards has the capacity to make 2,000 skateboards per year.

Costs for the skateboard components are:

Deck		$40.00

Trucks	$43.00
Wheels	42.00
Bearings	20.00
Bolts, etc.	15.00
Hardware package - net		120.00
	Total	$160.00

Each board should take one hour of direct labor to assemble. Direct labor wages are $55 per hour.

Other manufacturing costs on a monthly basis are:

	Rent	$2,500.00
	Insurance	500.00
	Utilities	200.00
	Miscellaneous	300.00
		$3,500.00

Inventory balances are as follows (Bonzo’s uses FIFO inventory cost flow assumption):

		Units	Dollars
Decks	1/1/2020	250	$10,000

	12/31/2020	350		< Budgeted

Hardware Package	1/1/2020	300	$36,000

	12/31/2020	360		< Budgeted

Finished skateboards	1/1/2020	300	$87,300

	12/31/2020	350		< Budgeted

During 2020 (the entire year) Bonzo’s Boards expects to sell 500 skateboards.

What is the budgeted cost of Skateboards manufactured for 2020?

What is the budgeted cost of Decks purchased for 2020?

What is the budgeted cost of Hardware Packages purchased for 2020?

What is budgeted dollar value of ending Finished Skateboard inventory?

What is the budgeted dollar value of ending Deck inventory?

What is the budgeted dollar value of ending Hardware Package inventory?

How much income does Bonzo’s Boards expect to make if they sell 500 skateboards in 2020 and have budgeted Selling & Administrative expenses of $20,000 (assume no income taxes)?

Expert Solution

ANSWER:

Budgeted cost of skateboards manufactured

Skateboards to be manufactured during the year

= Sales + Closing stock - Opening stock

= 500 + 350 - 300 = 550 units

Budgeted cost of skate boards manufactured

Cost of components @ $ 160 per unit (Deck + Hardware package) = 160*550 = 88000

Labour cost @ $ 55 per hour = 550 units X 1 hr per unit X Labour rate

= 550*1*55 = 30250

TOTAL (Budgeted cost of skateboards manufactured) 118250 $

Budgeted cost of decks purchased

Decks to be purchased = Consumption + Closing stock - Opening stock

= 550* + 350 - 250 = 650 decks

* No of skateboards to be manufactued - 550 units (as calculated above)

Budgeted cost of decks purchased = 650 units X $ 40 per unit = 26000 $

Budgeted cost of hardware packages purchased

Hardware packages to be purchased = Consumption + Closing stock - Opening stock

= 550* + 360 - 300 = 610 packages

* No of skateboards to be manufactued - 550 units (as calculated above)

Budgeted cost of hardware packages purchased = 610 units X $ 120 per unit = 73200 $

Budgeted dollar value of ending finished skateboard inventory

Closing stock of skateboard = 350 units

Cost per unit:

Component cost = $ 160

Labour cost = $ 55

Budgeted value of closing skateboard inventory

= Closing stock X Cost per unit

= 350 X (160+55)

= 75250 $

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