Question
In: Accounting
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
| 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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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
$
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Per sq. yard
Materials - Resin handles
$
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Direct Labor - Cutting and Assembly Line
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Packing & Inspection Costs (variable)
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They have gathered the following estimate data from various
teams:
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400,000
Materials - metal rods/clasps
$0.40
per unit, before wastage
Materials - high-strength fabric
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Materials - Resin handles
$0.25
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Direct Labor - Cutting and Assembly Line
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Packing & Inspection Costs (variable)
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