Redford Corporation Manufacturing Budget Redford Corporation, a maker of high-st
ID: 2530158 • Letter: R
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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 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 unchangedExplanation / Answer
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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