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Redford Corporation Manufacturing Budget Redford Corporation, a maker of high-strength umbrellas, is preparing a preliminary manufacturing...

Redford Corporation

Manufacturing Budget

Redford Corporation, a maker of high-strength umbrellas, is preparing a preliminary manufacturing budget for the year 2019

They have gathered the following estimate data from various teams:

Production units

400,000

Materials - metal rods/clasps

$           0.40

per unit, before wastage

Materials - high-strength fabric

$           1.20

Per sq. yard

Materials - Resin handles

$           0.25

per unit

Direct Labor - Cutting and Assembly Line

$         28.00

Per hour

Packing & Inspection Costs (variable)

$       300.00

Per batch

Factory fixed costs

$    300,000

Per Year

Additional information given:

Roughly 5% of metal parts are damaged or defective and are discarded as wastage

Each umbrella uses 1.5 sq. yards of high-strength fabric

Roughly 10% of the initial fabric quantity is not usable in the umbrellas due to the cutting process, but 20% of the value of this fabric is recovered by selling the unused pieces to a dealer

The current process uses roughly 20 hours of direct labor (cutting and assembly line) per batch of umbrellas

Each batch has 200 umbrellas

Q1. Prepare a Manufacturing Cost Budget for 2019 by quarter, assuming flat activity and equal-length quarters (do not adjust for days)

Q2. Prepare a High Case budget alternative assuming that production ramps up 50% in the second half.

       In this scenario, assume fixed costs increase by $60,000/yr due to need for additional storage space, while variable cost structure is unchanged

Solutions

Expert Solution

Q1. Prepare a Manufacturing Cost Budget for 2019 by quarter, assuming flat activity and equal-length quarters (do not adjust for days)- Solution
Particular Q1 Q2 Q3 Q4 Total
Production unit 100000 100000 100000 100000 400000
Material Metal Rod
Matel Rod Requirment per Quater=> 100000*100/95= 105263.16 (App) i.e 105264 42105.60 42105.60 42105.60 42105.60 168422.40
Since material rods are in parts so we have considered .16 as 1 part        (105264*0.4=42105.60)
Material High strength fabric (per umbrella requires 1.5 yard fabric)    200,000.00    200,000.00    200,000.00    200,000.00       800,000.00
Hence Requirment for 100000 units = 100000*1.5= 150000 sq yard       (166666.67*1.2=200000)
Requirment of Fabric before loss in cutting =150000*100/90=166666.67            
Amount reliased form sale of Scrape      (4,000.00)      (4,000.00)      (4,000.00)      (4,000.00) -16000
(166666.67-150000)*0.24=4000 (Since Revenue hence shown in Negative)
Material Resin Handle    (100000*0.25=25000) 25000 25000 25000 25000 100000
Direct Labour Cutting and Assembly (500*20*28=280000) 280000 280000 280000 280000 1120000
No batch per quater =100000/200=500 0
0
Packing and inspection (300*500=150000) 150000 150000 150000 150000 600000
0
Fixed Cost per quarter 300000/4=75000 75000 75000 75000 75000 300000
0
Total Cost of Production 768105.60 768105.60 768105.60 768105.60 3072422.42
Q2. Prepare a High Case budget alternative assuming that production ramps up 50% in the second half.      In this scenario, assume fixed costs increase by $60,000/yr due to need for additional storage space, while variable cost structure is unchanged
1st Half of year 2nd Half of year
Particular Q1 Q2 Q3 Q4 Total
Production unit 100000 100000 150000 150000 500000
50% increse in 2nd quarter ie 100000*150%=150000
Material Metal Rod
Matel Rod Requirment per Quater => 100000*100/95= 105263.16 (App) i.e 105264 |(105264*0.4=42105.60)| 42105.60 42105.60 63158.00 63158.00 210527.20
Material Metal Rod in 2nd Half of year per quarter =150000*100/95= 157895 (App) | (157895*0.4=63158.00)|
Since material rods are in parts so we have considered .16 as 1 part
Material High strength fabric (per umbrella requires 1.5 yard fabric)    200,000.00    200,000.00    300,000.00    300,000.00 1,000,000.01
Hence Requirment for 100000 units = 100000*1.5= 150000 sq yard
Requirment of Fabric before loss in cutting (1st Half yr) =150000*100/90=166666.67         |(166666.67*1.2=200000)
Requirment of Fabric before loss in cutting in 2nd half =225000*100/90=250000      | (250000*1.2=300000)
Amount reliased form sale of Scrape      (4,000.00)      (4,000.00)      (6,000.00)      (6,000.00)       (20,000.00)
for 1st half yr(166666.67-150000)*0.24=4000 / for 2nd half yr= (250000-225000)*0.24 =6000
Since Resale of Scape is Revenue shown in negative
Material Resin Handle 25000 25000 37500 37500 125000
Direct Labour Cutting and Assembly (500*20*28) 280000 280000 420000 420000 1400000
No batch per quater =100000/200=500                               |(500*20*28=280000)| 0
No batch per quarter in 2nd half =150000/200=750        |(750*20*28=420000)| 0
Packing and inspection (300*500=150000) 2nd Qt Packing and inspection (300*750=225000) 150000 150000 225000 225000 750000
0
Fixed Cost per quarter 360000/4 90000 90000 90000 90000 360000
0
Total Cost of Production 783105.60 783105.60 1129658.00 1129658.00 3825527.21

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