Budget schedules for a manufacturer. Lame Specialties manufactures, among other

Question

Budget schedules for a manufacturer. Lame Specialties manufactures, among other things, woolen blankets for the athletic teams of the two local high schools. The company sews the blankets from fabric and sews on a logo patch purchased from the licensed logo store site. The teams are as follows: Knights, with red blankets and the Knights logo Raiders, with black blankets and the Raider logo Also, the black blankets are slightly larger than the red blankets. The budgeted direct-cost inputs for each product in 2014 are as follows: Knights Blanket Raiders Blanket Red wool fabric 4 yards 0 yards Black wool fabric 0 5 Knight logo patches 1 0 Raider logo patches 0 1 Direct manufacturing labor 3 hours 4 hours Unit data pertaining to the direct materials for March 2014 are as follows: Actual Beginning Direct Materials Inventory (3/1/2014) Knights Blanket Raiders Blanket Red wool fabric 35 yards 0 yards Black wool fabric 0 15 Knight logo patches 45 0 Raider logo patches 0 60 Target Ending Direct Materials Inventory (3/31/2014) Knights Blanket Blanket Red wool fabric 25 yards 0 yards Black wool fabric 0 25 Knight logo patches 25 0 Raider logo patches 0 25 Unit cost data for direct-cost inputs pertaining to February 2014 and March 2014 are as follows: February 2014 (actual) March 2014 (budgeted) Red wool fabric (per yard) $ 9 $10 Black wool fabric (per yard) 12 11 Knight logo patches (per patch) 7 7 Raider logo patches (per patch) 6 8 Manufacturing labor cost per hour 26 27 Manufacturing overhead (both variable and fixed) is allocated to each blanket on the basis of budgeted direct manufacturing labor-hours per blanket. The budgeted variable manufacturing overhead rate for March 2014 is $16 per direct manufacturing labor-hour. The budgeted fixed manufacturing overhead for March 2014 is $14,640. Both variable and fixed manufacturing overhead costs are allocated to each unit of finished goods. Data relating to finished goods inventory for March 2014 are as follows: Knights Blankets Raiders Blankets Beginning inventory in units     12     17 Beginning inventory in dollars (cost) $1,440 $2,550 Target ending inventory in units     22     27 Budgeted sales for March 2014 are 130 units of the Knights blankets and 190 units of the Raiders blankets. The budgeted selling prices per unit in March 2014 are $229 for the Knights blankets and $296 for the Raiders blankets. Assume the following in your answer: Work-in-process inventories are negligible and ignored. Direct materials inventory and finished goods inventory are costed using the FIFO method. Unit costs of direct materials purchased and finished goods are constant in March 2014. Required 1. Prepare the following budgets for March 2014: a. Revenues budget b. Production budget in units c. Direct material usage budget and direct material purchases budget d. Direct manufacturing labor budget e. Manufacturing overhead budget f. Ending inventories budget (direct materials and finished goods) g. Cost of goods sold budget 2. Suppose Lame Specialties decides to incorporate continuous improvement into its budgeting process. Describe two areas where it could incorporate continuous improvement into the budget schedules in requirement 1.

Explanation / Answer

Knight Red Raiders black Material Red Wool fabric 4 0 Black wool fabrics 0 5 Knight logo patches 1 0 Raider logo patches 0 1 Direct labour 3 hrs 4 hrs Opening material Red Wool fabric 35 0 Black wool fabrics 0 15 Knight logo patches 25 0 Raider logo patches 0 25 Closing inventory Red Wool fabric 25 0 Black wool fabrics 0 25 Knight logo patches 25 0 Raider logo patches 0 25 February March Red Wool fabric 9 10 Black wool fabrics 12 11 Knight logo patches 7 7 Raider logo patches 6 8 Labour cost per hour 26 27 variable MOH 16 per LH Budgected Fixed MOH 14640 aloocate to FG beginning Inventory 12 17 At cost 1440 2550 Ending inventory 22 27 Budjected sales 130 190 SP 229 296 Production budgect Knight Red Raiders black beginning Inventory 12 17 Budjected sales 130 190 Ending inventory 22 27 Budjected production 140 200 (Sales+closing - opening) Direct material usage budgect Knight Red Raiders black Budjected production 140 200 Material required for one unit Red Wool fabric 4 Black wool fabrics 5 Knight logo patches 1 Raider logo patches 1 Material required for March Red Wool fabric 560 Yard Black wool fabrics 1000 Yard Knight logo patches 140 patches Raider logo patches 200 patches Direct material purchase budgect Red Wool fabric Black wool fabrics Knight logo patches Raider logo patches Opening inventory 35 15 25 25 Required for production 560 1000 140 200 Closing inventory 25 25 25 25 Purchase 550 1010 140 200 (Closing + Production - opening) Direct manufacturing labour budgect Knight Red Raiders black Budjected production 140 200 Direct labour 3 hrs 4 hrs Total hours required 420 800 Labour cost per hour 26 27 Total labour cost 10920 21600 Manufacturing Over heads budgect Knight Red Raiders black Variable manufacturing OH @ 16 per Labour hour Total hours required 420 800 Variable manufacturing OH 6720 12800 Fixed manufacturing OH 14,640 to finished Goods Budjected production 140 200 Fioxed OH allocated 6028 8612 Total manufacturing OH 12748 21412 Ending Inventory Budgect Material Red Wool fabric 25 Black wool fabrics 25 Knight logo patches 25 Raider logo patches 25 Finished Goods Knight Red 22 Raiders black 27 Cost of Goods sold Knight Red Raiders black Opening Finished goods 1440 2550 Opening raw material Red Wool fabric @9 35 315 Black wool fabrics @12 15 180 Knight logo patches@7 25 175 Raider logo patches@6 25 150 Purchase Red Wool fabric 5500 Black wool fabrics 11110 Knight logo patches 980 Raider logo patches 1600 Labour cost 10920 21600 Manufacturing OH 12748 21412 Closing raw material Red Wool fabric @10 250 Black wool fabrics@11 275 Knight logo patches@7 175 Raider logo patches@8 200 Cost of goods produced 30213 43012 (Opening material+purchase-closing materil+ Direct labour+manufacturing OH) Number of units produced 140 200 cost per unit 215.81 215.06 Closing inventory 22 and 27 valued at cost 4747.82 5806.62 Cost of goods sold (Opening cost+ production cost - closing goods cost) 26905.18 39755.38 Revenue budgect Unit sold 130 190 Selling price 229 296 Sales revenue 29770 56240 Less: Cost of goods sold 26905.18 39755.38 Gross Profit 2864.82 16484.62

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