Question

In: Accounting

Part A Furniture Specialties is a company that make two types of dining tables: Simple and...

Part A

Furniture Specialties is a company that make two types of dining tables: Simple and Futuristic. There are two types of direct materials: Pine and Mahogany woods. Direct manufacturing labour workers are hired on an hourly basis; no overtime is worked. In terms of manufacturing overhead costs, there are two manufacturing overhead cost pools and two cost drivers. The two manufacturing overhead cost pools are manufacturing operations overhead and machine setup overhead. The cost drivers for manufacturing overhead are: direct manufacturing labour-hours for manufacturing operations overhead cost and setup labour-hours for machine setup overhead cost. Nonmanufacturing costs consist of product design, marketing, and distribution costs.

The following data are available for the 2018 budget:

Direct Materials Rate

Pine

$ 9 per meter square (m2)

Mahogany

$13 per meter square (m2)

Direct Manufacturing labour rate

$25 per hour

Quantity of Material for Each Product

Simple Table

Futuristic Table

Pine

14 m2

14 m2

Mahogany

8 m2

10 m2

Direct Material Labour

6 hours

8 hours

Products

Simple Table

Futuristic Table

Expected Sales for 2018 (in units)

55,000

15,000

Selling Price

$                 750

$              950

Target ending inventory in units

12,000

500

Beginning inventory in units

1,000

500

Beginning inventory in dollars

                  $          400,000

$       275,000

Direct materials inventory

Pine

Mahogany

Beginning inventory

85,000 m2

65,000 m2

Target ending inventory

90,000 m2

25,000 m2

Data on Manufacturing Overhead Cost

Manufacturing Operations Overhead cost (in capacity of 350,000 direct manufacturing labour-hours)

Variable manufacturing operation overhead costs (per direct manufacturing labour-hours)

Supplies

Indirect manufacturing labour

Power (support department costs)

Maintenance (support department costs)

Total variable manufacturing operation overhead cost

$                       4.50

6.50

7.00

                     3.50

$                     21.50

Fixed manufacturing operation overhead cost

Depreciation

Supervision

Power (support department costs)

Maintenance (support department costs)

Total fixed manufacturing operation overhead cost

$           1,400,000

420,000

725,000

                430,000

$           2,975,000

Machine Setup Overhead Costs (in capacity of 15,150 setup labour-hours)

Variable machine setup overhead cost (per setup labour-hours)

Supplies

Indirect manufacturing labour

Power (support department)

Total variable machine setup overhead cost

$                        25

55

                         10

$                       90

Fixed machine setup overhead cost

Depreciation

Supervision

Power (Support department cost)

Total fixed machine setup overhead cost

$             605,000

1,040,000

                  21,500

$         1,666,500

0.2 hour of setup labour-hour is allocated to make one unit of simple table and 0.3 hour of setup labour-hour is allocated for futuristic table

Non-manufacturing Cost

Product Design Cost (fixed)

$           1,100,000

Marketing Cost

Fixed marketing cost

Variable marketing cost is equals the 7.5% of revenues

$           1,350,000

Distribution Cost

Fixed distribution cost

Variable distribution cost is $2 per cubic feet of table sold and shipped

Simple table 20 cubic feet per table sold and shipped

Futuristic table 25 cubic feet per table sold and shipped

     $          1,700,000

Required:

Based on the above information provided by the various department managers, prepare the following budgets:

C. Direct Material Usage Budget in quantity and dollars (6 points)

Solutions

Expert Solution

C.

Pine Mahagony
Direct material usage - Sq.mtr 1134000 678000
Direct material usage - Dollars 10206000 8814000

Working:

Simple Table futuristic table
Budgeted unit sales 55000 15000
Add: Ending inventory 12000 500
Total units needed 67000 15500
Less: Beginning Inventory 1000 500
Budgeted Prodcution 66000 15000
Raw material budget
Pine Mahagony
Simple Table
Production - units 66000 66000
Material required per unit - Sq.Mtr 14 8
Material required for production (A) 924000 528000
Futuristic Table Table
Production - units 15000 15000
Material required per unit - Sq.Mtr 14 10
Material required for production (B) 210000 150000
Total material reuquired for production (A + B) 1134000 678000
Add: Target ending inventory 90000 25000
1224000 703000
Less: Beginning Inventory 85000 65000
Budgeted material purchases - Sq.Mtr. 1139000 638000
Cost per sq.mtr of raw material - $ 9 13
Budgeted material purchases - Dollars 10251000 8294000

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