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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

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Expert Solution

Requirement Q1
Manufacturing cost budget for 2019
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total
production units          100,000                   100,000          100,000          100,000             400,000
Materials-metal rods/clasps $40,000 $40,000 $40,000 $40,000 $160,000
Materials-High strengh Fabric $176,400 $176,400 $176,400 $176,400 $705,600
Materials Resin handles $25,000 $25,000 $25,000 $25,000 $100,000
Direct cutting and assembly $280,000 $280,000 $280,000 $280,000 $1,120,000
Packing and inspection costs $150,000 $150,000 $150,000 $150,000 $600,000
Fixed Factory cost $75,000 $75,000 $75,000 $75,000 $300,000
Total manufacturing cost $746,400 $746,400 $746,400 $746,400 $2,985,600
Working Notes
Materials -metals & clasps (100000*0.40) 40000 For Each Qtr
Materials-High strength fabric (100000*1.2*1.5) 180000
Less : Value of fabric recoved
180000*10%*20%
3600
Net Materials cost of fabric 176400 For each quarter
Materials Resin handles
(100000*0.25)
25000 For each quarter
Direct cutting and assembly
(20/200*28*100000)
280000 For each quarter
Packing and inspection costs
(100000/200*300)
150000 For each quarter
Fixed Factory cost
(300000/4)
75000 For each quarter
Requirement Q2
Manufacturing cost budget for 2019
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total
production units 100000 100000 150000 150000 500000
Materials-metal rods/clasps $40,000 $40,000 $60,000 $60,000 $200,000
Materials-High strengh Fabric $176,400 $176,400 $264,600 $264,600 $882,000
Materials Resin handles $25,000 $25,000 $37,500 $37,500 $125,000
Direct cutting and assembly $280,000 $280,000 $420,000 $420,000 $1,400,000
Packing and inspection costs $150,000 $150,000 $225,000 $225,000 $750,000
Fixed Factory cost $75,000 $75,000 $105,000 $105,000 $360,000
Total manufacturing cost $746,400 $746,400 $1,112,100 $1,112,100 $3,717,000
Working Notes
Materials -metals & clasps
(150000*0.4)
60000 For each quarter of second half
Materials-High strength fabric
(150000*1.2*1.5)
270000
Less : Value of fabric recoved
(270000*10%*20%)
5400
Net Materials cost of fabric 264600 For each quarter of second half
Materials Resin handles
(150000*0.25)
37500 For each quarter of second half
Direct cutting and assembly
(20/200*28*150000)
420000 For each quarter of second half
Packing and inspection costs
(150000/200*300)
225000 For each quarter of second half
Fixed Factory cost
(300000/4+30000)
105000 For each quarter of second half
Note: Increased in fixed factory cost by $60000 can be allocated to all quarters equally. However, we have assumed that additional storage space is hired in second half and thus allocated this cost to quarters of Second Half only.

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