Question

Diane Buswel! is preparing the 201/ budget for one of Current Designs rotomolded kayaks Extensive meetings with members of the sales department and executive team have resulted in the following unit sales projections for 2017. Quarte 1,000 kayaks Quarter 2 1,500 kayaks Quarter 3 750 kayaks Quarter 4 750 kayaks Current Designs policy is to have finished goods ending inventory in a quarter equal to 20% of the next quarters anticipated sales. Preliminary sales projections for 2018 are 1,100 units for the first quarter and 1,500 units for the second quarter. Ending inventory of finished goods at December 31, 2016, will be 200 rotomolded kayak:s Production of each kayak requires 54 pounds of polyethylene powder and a finishing kit (rope, seat, hardware, etc.). Company policy is that the ending inventory of polyethylene powder should be 25% of the amount needed for production in the next quarter. Assume that the ending inventory of polyethylene powder on December 31,2016, is 19,400 pounds. The finishing kits can be assembled as they are needed. As a result, Current Designs does not maintain a significant inventory of the finishing kits The polyethylene powder used in these kayaks costs $1.50 per pound, and the finishing kits cost $170 each. Production of a single kayak requires 2 hours of time by more experienced, type I employees and 3 hours of finishing time by type II employees. The type I employees are paid $15 per hour, and the type II employees are paid $12 per hour Selling and administrative expenses for this line are expected to be $45 per unit sold plus $7,500 per quarter. Manufacturing overhead is assigned at 150% of labor costs Instructions Prepare the production budget, direct materials budget, direct labor budget, manufacturing overhead budget, and selling and administrative budget for this product line by quarter and in total for 2017

Answer 1

Production Budget	2017					2018
	Qtr.1	Qtr.2	Qtr.3	Qtr.4		Qtr.1	Qtr.2
Sales units	1000	1500	750	750	4000	1100	1500
Desired ending finished units(20%*Next qtr. Sales units)	300	150	150	220	220	300
Total Needed	1300	1650	900	970	4220	1400
Less:Beg.units available	200	300	150	150	200	220
Production reqd.	1100	1350	750	820	4020	1180
Direct materials Budget
1. Polyethylene Powder (in Pounds)
Pounds reqd. for prodn.(Prodn.units*54)	59400	72900	40500	44280	217080	63720
Desired ending Inv.(25%*Next qtr. Prodn.needs)	18225	10125	11070	15930	15930
Total Needed	77625	83025	51570	60210	233010
Less:Beg.Pds. available	19400	18225	10125	11070	19400
Purchases reqd.	58225	64800	41445	49140	213610
Cost /pd.	1.5	1.5	1.5	1.5	1.5
a.Total cost	87337.5	97200	62167.5	73710	320415
Finishing kits Budget
Total kits reqd. at 1/prodn. Unit	1100	1350	750	820	4020
Cost/kit	170	170	170	170	170
b.Total cost	187000	229500	127500	139400	683400
Total cost of Direct materials(a+b)	274337.5	326700	189667.5	213110	1003815
Direct Labor budget
Production reqd.	1100	1350	750	820	4020
Type I Labor hrs reqd. at 2/unit	2200	2700	1500	1640	8040
c.Type I Lab.cost at $ 15/hr.	33000	40500	22500	24600	120600
Type II Labor hrs reqd. at 3/unit	3300	4050	2250	2460	12060
d.Type II Lab.cost at $ 12/hr.	39600	48600	27000	29520	144720
Total direct labor cost(c+d)	72600	89100	49500	54120	265320
Manufacturing Overhead Budget
150%*Total D/L cost	108900	133650	74250	81180	397980
Selling and administrative expenses Budget
Sales units	1000	1500	750	750	4000
Variable S&A   amt.(Units sold*$ 45)	45000	67500	33750	33750	180000
Fixed S&A	7500	7500	7500	7500	30000
Total S&A expenes	52500	75000	41250	41250	210000